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BUSINESS OVERVIEW
−Removed: We are a global security and aerospace company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.
+Added: We are a global defense technology company driving innovation and advancing scientific discovery.
+Added: Our all-domain mission solutions and 21st Century Security vision accelerate the delivery of transformative technologies to our customers.
+Added: We are principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.
We also provide a broad range of management, engineering, technical, scientific, logistics, system integration and cybersecurity services.
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and international customers with products and services that have defense, civil and commercial applications, with our principal customers being agencies of the U.S.
−Removed: During the nine months ended September 24, 2023, 74% of our $48.7 billion in net sales were from the U.S.
+Added: During the quarter ended March 31, 2024, 75% of our $17.2 billion in net sales were from the U.S.
Government, either as a prime contractor or as a subcontractor (including 66% from the Department of Defense (DoD)), 24% were from international customers (including foreign military sales (FMS) contracted through the U.S.
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Budget Environment
−Removed: With nearly three quarters of our sales from the U.S.
+Added: With three quarters of our sales from the U.S.
Government, U.S.
Government spending levels, particularly defense spending, and timely funding thereof can affect our financial performance over the short and long term.
−Removed: The President’s Fiscal Year (FY) 2024 budget request was submitted to Congress on March 9, 2023, initiating the FY 2024 defense authorization and appropriations legislative process.
−Removed: The request includes $886 billion for National Defense, of which $842 billion is for the DoD base budget.
−Removed: On June 3, 2023, the President signed H.R.
−Removed: 3746 “The Fiscal Responsibility Act” (FRA) into law.
−Removed: The legislation suspends the debt ceiling until January 1, 2025, and, among other provisions, caps national defense spending at $886 billion for FY 2024 (President’s Budget Request level) and $895 billion for FY 2025.
−Removed: Supplemental funding legislation is not subject to the budget caps.
−Removed: Additionally, the FRA will result in a decrease in government spending for FY 2024 by one percent from FY 2023 enacted levels if Congress does not pass all twelve defense and non-defense discretionary appropriations bills by the end of 2023.
−Removed: If all twelve bills are not enacted, the sequestration process would be initiated on January 1, 2024, with effective implementation no later than April 30, 2024.
−Removed: The House and Senate continue the legislative process on the FY 2024 budget.
−Removed: Final passage of the FY 2024 National Defense Authorization Act (NDAA) is anticipated before the end of the calendar year.
−Removed: Congress will also continue its effort to move appropriations bills and conference agreements, but these actions are dependent on the House leadership vote and Senate calendar.
−Removed: The FRA spending cap limits the ability of the defense committees to support significant increases in program funding without supplemental or emergency funding designations.
−Removed: Overall, congressional sentiment remains strong for supporting the National Defense Strategy and defense spending.
−Removed: On September 30, 2023, the President signed a continuing resolution to continue funding the U.S government at FY 2023 levels through the earlier of November 17, 2023, or until FY 2024 appropriations bills are enacted.
−Removed: Under the continuing resolution, funding at amounts consistent with appropriated levels for FY 2023 are available, subject to certain restrictions, but new contract and program starts are not authorized.
−Removed: We expect our key programs will continue to be supported and funded under the continuing resolution.
−Removed: However, during periods covered by continuing resolutions, we may experience delays in new awards of our products and services, and those delays may adversely affect our results of operations.
−Removed: If Congress is not able to enact FY 2024 appropriations bills or extend the continuing resolution, the U.S.
−Removed: government will enter a whole or partial shutdown.
−Removed: The impact of any government shutdown is uncertain.
−Removed: However, if a government shutdown were to occur and were to continue for an extended period, we could be at risk of program cancellations, schedule delays, production halts and other disruptions and nonpayment, which could adversely affect our results of operations.
−Removed: We anticipate the federal budget will continue to be subject to debate and compromise shaped by, among other things, heightened political tensions, the global security environment, inflationary pressures, and macroeconomic conditions.
+Added: On March 22, 2024, the President signed the second Fiscal Year (FY) 2024 Consolidated Appropriations package into law, which includes the DoD.
+Added: This legislation reflects the Fiscal Responsibility Act (FRA) spending limit of $886 billion for National Defense, of which $842 billion was for the DoD base budget.
+Added: The President’s FY 2025 budget request was submitted to Congress on March 11, 2024, initiating the FY 2025 defense authorization and appropriations legislative process.
+Added: The request included $895 billion for National Defense, of which $850 billion is for the DoD base budget, in keeping with the limit established by the FRA.
+Added: While compression on overall requirements driven by the FRA limit is evident, the Office of the Secretary of Defense has stated the FY 2025 budget proposal meets their objectives of keeping National Defense Strategy priorities on track.
+Added: On April 20, 2024, the House of Representatives passed three bills providing a total of $95 billion in additional supplemental funding for Ukraine, Israel and Taiwan, to include funding for the restock of U.S.
+Added: munitions capacity, and a fourth bill to impose sanctions and allow the use of seized Russian assets to assist Ukraine.
+Added: The four bills were combined into to one and sent to the Senate, where it is expected to be passed and subsequently signed into law in the near-term.
+Added: We anticipate the federal budget will continue to be subject to debate and compromise shaped by, among other things, heightened political tensions and the 2024 elections, the global security environment, inflationary pressures, and macroeconomic conditions.
The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs.
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Geopolitical and Economic Environment
−Removed: We operate in a complex and evolving global security environment and our business is affected by geopolitical issues.
−Removed: Russia’s invasion of Ukraine significantly elevated global geopolitical tensions and security concerns resulting in increased interest for certain of our products and services as countries seek to improve their security posture.
+Added: We operate in a complex and evolving global security environment and our business is affected by geopolitical and security issues.
+Added: Russia’s invasion of Ukraine, conflicts in the Middle East and heightened tension in the Pacific region have elevated global security concerns resulting in increased interest for our products and services as countries seek to improve their security posture.
+Added: In this context, the U.S.
+Added: Government, our largest customer, continues to align its budget with the defense priorities set forth in the 2022 National Defense Strategy.
In addition, security assistance provided by the U.S.
−Removed: Government and its allies to Ukraine has created U.S.
+Added: Government and its allies to Ukraine has increased U.S.
Government and allied demand to replenish U.S.
−Removed: stockpiles, resulting in additional and potential future orders for our products, including for the ramp-up in production capacity for certain products.
−Removed: However, given the long-cycle nature of our business and current industry capacity, we do not expect a significant increase in 2023 sales from new contracts in response to the conflict.
+Added: stockpiles, resulting in additional and potential future orders, including for the ramp-up in production capacity for certain products.
+Added: We continue to expect additional orders over the next several years attributable to the global threat environment.
+Added: in a long-cycle business and the U.S.
+Added: government has been focused on increasing industry capacity to meet demand.
+Added: For example, in 2024, our Missiles and Fire Control business segment expects to begin realizing higher year over year sales from the production ramp up associated with munitions replenishment.
We continue to work with the U.S.
−Removed: Government and our supply chain to evaluate increases in capacity at certain of our operations to anticipate potential demand and enable us to deliver critical capabilities.
+Added: Government and our supply chain to evaluate increases in capacity at our operations to anticipate potential demand and enable us to deliver critical capabilities.
Our business and financial performance is also affected by general economic conditions.
−Removed: Supply chain disruptions persist, and we continue to experience supply chain challenges, including supplier shortages and performance issues, which have delayed certain customer deliveries and adversely impacted our performance and our financial results year to date.
−Removed: While we continue working to minimize the impact of supply chain challenges, many of these challenges are industry wide or caused by geopolitical events that are outside of our control.
−Removed: In addition, heightened levels of inflation and the potential worsening of macro-economic conditions present risks for Lockheed Martin, our suppliers and the stability of the broader defense industrial base.
−Removed: Certain costs, including rising labor rates and supplier costs, on several of our programs have increased as a result of inflation, and put pressure on achieving our expected margins on the programs.
−Removed: In addition, some suppliers are reducing the typical duration of pricing validity in their proposals to us, which can be operationally challenging and increase the risk of cost volatility.
−Removed: If we continue to experience high rates of inflation, and we are unable to successfully mitigate the impact, our future profits, margins and cash flows, particularly for existing fixed-price contracts, may be adversely affected.
−Removed: Inflation and higher interest rates can also constrain the overall purchasing power of our customers for our products and services potentially impacting future orders.
+Added: We continue to experience supply chain challenges, including supplier shortages and performance issues.
+Added: These issues have delayed certain customer deliveries, have been a limiting factor on our ability to ramp up production in response to customer demand for certain products and have caused out-of-sequence manufacturing, which increases costs and decreases operational efficiency.
+Added: In addition, elevated levels of inflation and macro-economic conditions present risks for Lockheed Martin, our suppliers and the stability of the broader defense industrial base.
+Added: Certain costs, including rising labor rates and supplier costs, have increased as a result of inflation, and have adversely affected our margins on certain programs.
+Added: In addition, some suppliers are reducing the typical duration of pricing validity in their proposals to us, which is operationally challenging and increases the risk of cost volatility.
+Added: We continue to work to mitigate challenges caused by the supply chain or current macroeconomic environment on our business, including by supporting small business and at-risk suppliers, deploying resources to work with our supply chain, securing materials and support by executing long-term contracts, identifying alternative sources, and optimizing our supply chain organization through digital transformation and workforce development.
+Added: If we experience significant supply chain issues or high rates of inflation, and are unable to successfully mitigate the impact, our future profits, margins and cash flows, particularly for existing fixed-price contracts, may be adversely affected.
+Added: Inflation and higher interest rates can also constrain the overall purchasing power of our customers for our products and services potentially impacting future orders, especially in a budget constrained environment.
We remain committed to our ongoing efforts to increase the efficiency of our operations and improve the cost competitiveness and affordability of our products and services, which may, in part, offset cost increases from inflation.
2 unchanged sentences
Our operating cycle is primarily long-term and involves many types of contracts for the design, development and manufacture of products and related activities with varying delivery schedules.
+Added: Additionally, we close our books and records on the last Sunday of each month, except for the month of December, as our fiscal year ends on December 31, to align our financial closing with our business processes.
+Added: Because of this, the number of weeks in a reporting quarter may vary slightly during the year and for comparable prior year periods.
Consequently, the results of operations of a particular year, or year-to-year comparisons of sales and profits, may not be indicative of future operating results.
2 unchanged sentences
Our consolidated results of operations were as follows (in millions, except per share data):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 24,
−Removed: 2023 September 25,
−Removed: 2022 September 24,
−Removed: 2023 September 25,
+Added: Quarters Ended
+Added: 2024 March 26,
Net sales $ 17,195 $ 15,126
1 unchanged sentence
Gross profit 1,993 2,046
−Removed: Other (expense) income, net (6) 39 30 70
+Added: Other income (expense), net 36 (9)
Operating profit 2,029 2,037
Interest expense (255) (202)
−Removed: Non-service FAS pension income (expense) 111 111 332 (1,080)
−Removed: Other non-operating income (expense), net 37 (26) 69 (64)
+Added: Non-service FAS pension income 16 110
+Added: Other non-operating income, net 45 49
Earnings before income taxes 1,835 1,994
2 unchanged sentences
Diluted earnings per common share $ 6.39 $ 6.61
−Removed: Certain amounts reported in other income, net, including our share of earnings or losses from equity method investees, are included in the operating profit of our business segments.
+Added: Certain amounts reported in other income (expense), net, including our share of earnings or losses from equity method investees, are included in the operating profit of our business segments.
Accordingly, such amounts are included in the discussion of our business segment results of operations.
1 unchanged sentence
Our consolidated net sales were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 24,
−Removed: 2023 September 25,
−Removed: 2022 September 24,
−Removed: 2023 September 25,
+Added: Quarters Ended
+Added: 2024 March 26,
Products $ 14,196 $ 12,526
7 unchanged sentences
Product Sales
−Removed: Product sales during the quarter ended September 24, 2023 were comparable to the same period in 2022.
−Removed: Lower product sales of $535 million at Aeronautics were mostly offset by higher product sales of $280 million at RMS and $175 million at Space.
−Removed: Lower product sales at Aeronautics were due to lower volume on F-35 production contracts.
−Removed: Higher product sales at RMS were due to higher volume on various integrated warfare systems and sensors (IWSS) programs.
−Removed: Higher product sales at Space were due to higher volume on strategic and missile defense programs (Next Generation Interceptor (NGI) development and Fleet Ballistic Missile (FBM)).
−Removed: Product sales increased $1.0 billion, or 3%, during the nine months ended September 24, 2023 compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher product sales of $845 million at Space due to higher volume for strategic and missile defense programs (NGI development and FBM) and national security space programs (Global Positioning System (GPS) III,Transport Layer development and classified development programs).
+Added: Product sales increased $1.7 billion, or 13%, during the quarter ended March 31, 2024, compared to the same period in 2023.
+Added: The increase was primarily attributable to higher product sales of $575 million at MFC, $450 million at RMS, $435 million at Aeronautics and $210 million at Space.
+Added: Higher product sales at MFC were due to production ramp up on Guided Multiple Launch Rocket Systems (GMLRS), High Mobility Artillery Rocket System (HIMARS), Joint Air-to-Surface Standoff Missile (JASSM) and Long Range Anti-Ship Missile (LRASM) programs.
+Added: Higher product sales at RMS were due to new program ramp up within the laser systems portfolio and higher volume on various C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) and radar programs.
+Added: Higher product sales at Aeronautics were due to higher volume on classified and F-35 production contracts.
+Added: Higher product sales at Space were due to higher volume on Fleet Ballistic Missile (FBM) and transport layer programs and ramp up in the hypersonic development programs.
Service Sales
−Removed: Service sales increased $292 million, or 11%, during the quarter ended September 24, 2023 compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher sales of approximately $165 million at Aeronautics due to higher volume on F-35 sustainment contracts.
−Removed: Service sales increased $672 million, or 9%, during the nine months ended September 24, 2023 compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher sales of approximately $465 million at Aeronautics due to higher volume on F-35 sustainment contracts and $115 million at Space due to higher volume on national security space programs (classified development and Space-Based Infrared System (SBIRS)).
+Added: Service sales increased $399 million, or 15%, during the quarter ended March 31, 2024, compared to the same period in 2023.
+Added: The increase was primarily attributable to higher service sales of approximately $140 million at Aeronautics, $130 million at RMS and $100 million at Space.
+Added: Higher service sales at Aeronautics were due to higher volume on C-130 and F-35 sustainment contracts.
+Added: Higher service sales at RMS were due to higher volume on various Training and Logistics Services and C6ISR programs.
+Added: Higher service sales at Space were due to higher volume on national security space services.
Cost of Sales
2 unchanged sentences
Our consolidated cost of sales were as follows (in millions):
−Removed: Quarters Ended Six Months Ended (a)
−Removed: September 24,
−Removed: 2023 September 25,
−Removed: 2022 September 24,
−Removed: 2023 September 25,
+Added: Quarters Ended
+Added: 2024 March 26,
Cost of sales – products $ (12,884) $ (11,151)
4 unchanged sentences
Total cost of sales $ (15,202) $ (13,080)
−Removed: (a) Effective January 1, 2023, we reclassified intangible asset amortization expense out of the business segment operating profit and into the unallocated items line item to better align with how management views and manages the business.
−Removed: See “Note 1 - Basis of Presentation” included in our Notes to Consolidated Financial Statements for further information regarding the impact of this change on our current and prior period segment operating profit.
The following discussion of material changes in our consolidated cost of sales for products and services should be read in tandem with the preceding discussion of changes in our consolidated net sales and our business segment results of operations.
1 unchanged sentence
Product Costs
−Removed: Product costs increased $78 million, or 1%, during the quarter ended September 24, 2023 compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher product costs of $245 million at RMS, and $200 million at
−Removed: Space, offset by lower product costs of $445 million at Aeronautics.
−Removed: Higher product costs at RMS were due to higher volume on various IWSS programs.
−Removed: Higher product costs at Space were due to higher volume for strategic and missile defense programs (NGI development and FBM) and national security space programs (GPS III).
−Removed: Lower product costs at Aeronautics were due to lower volume on F-35 production contracts.
−Removed: Product costs increased $1.0 billion, or 3%, during the nine months ended September 24, 2023 compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher product costs of $775 million at Space due to higher volume for strategic and missile defense programs (NGI development and FBM) and national security space programs (GPS III,Transport Layer development and classified development programs).
+Added: Product costs increased $1.7 billion, or 16%, during the quarter ended March 31, 2024, compared to the same period in 2023.
+Added: The increase was primarily attributable to higher product costs of approximately $650 million at MFC, $460 million at Aeronautics, $400 million at RMS and $220 million at Space due to higher volume and production ramp up as described above in “Product Sales”.
Service Costs
−Removed: Service costs increased $275 million, or 12%, during the quarter ended September 24, 2023 compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher service costs of approximately $155 million at Aeronautics due to higher volume on F-35 sustainment contracts.
−Removed: Service costs increased $678 million, or 10%, during the nine months ended September 24, 2023 compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher service costs of approximately $440 million at Aeronautics due to higher volume on F-35 sustainment contracts and $100 million at Space due to higher volume on national security space programs (classified and SBIRS).
+Added: Service costs increased $319 million, or 14%, during the quarter ended March 31, 2024, compared to the same period in 2023.
+Added: The increase was primarily attributable to higher service costs of $115 million at Aeronautics, $95 million at RMS and $80 million at Space due to higher volume as described above in “Service Sales”.
Other Unallocated, Net
−Removed: Other unallocated, net primarily includes the FAS/CAS pension operating adjustment (which represents the difference between total CAS pension cost recorded in our business segments’ results of operations and the service cost component of Financial Accounting Standards (FAS) pension expense), stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, intangible asset amortization expense and other corporate costs.
+Added: Other unallocated, net primarily includes the FAS/CAS pension operating adjustment (which represents the difference between total CAS pension cost recorded in our business segments’ results of operations and the service cost component of Financial Accounting Standards (FAS) pension income (expense)), stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, intangible asset amortization expense and other corporate costs.
These items are not allocated to the business segments and, therefore, are not allocated to cost of sales for products or services.
−Removed: Other unallocated, net reduced cost of sales by $251 million and $883 million during the quarter and nine months ended September 24, 2023, compared to $265 million and $689 million during the quarter and nine months ended September 25, 2022.
−Removed: There were lower losses from the changes in the fair value of assets and liabilities related to deferred compensation plans during the quarter and nine months ended September 24, 2023 compared to the same periods in 2022.
−Removed: Other (Expense) Income, Net
−Removed: Other (expense) income, net, primarily includes earnings generated by equity method investees.
−Removed: Other expense, net was $6 million compared to other income, net of $39 million during the quarters ended September 24, 2023 and 2022.
−Removed: Other income, net was $30 million and $70 million during the nine months ended September 24, 2023 and 2022.
−Removed: Other (expense) income, net during the quarter and nine months ended September 24, 2023 includes lower earnings generated by our equity method investment in ULA due to lower launch volume and an increase in new product development costs.
+Added: Other unallocated, net reduced cost of sales by $285 million during the quarter ended March 31, 2024, compared to $355 million during the quarter ended March 26, 2023.
+Added: The decrease in other unallocated, net was primarily due to lower gains from the changes in the fair value of assets and liabilities related to deferred compensation plans during the quarter ended March 31, 2024 compared to the same periods in 2023 and fluctuations in costs associated with various corporate items, none of which were individually significant.
+Added: Other Income (Expense), Net
+Added: Other income (expense), net, primarily includes earnings generated by equity method investees.
+Added: Other income, net was $36 million during the quarter ended March 31, 2024, compared to other expense, net of $9 million during the quarter ended March 26, 2023.
+Added: Other income (expense), net during the quarter ended March 31, 2024 includes higher earnings generated by our equity method investment in ULA due to higher launch volume.
Interest Expense
−Removed: Interest expense during the quarter and nine months ended September 24, 2023 was $237 million and $662 million, compared to $145 million and $421 million during the quarter and nine months ended September 25, 2022.
−Removed: The increase in interest expense in 2023 resulted primarily from the issuance of senior unsecured notes in October 2022 and May 2023.
−Removed: Non-Service FAS Pension Income (Expense)
−Removed: Non-service FAS pension income was $111 million during the quarters ended September 24, 2023 and 2022.
−Removed: Non-service FAS pension income was $332 million compared to non-service FAS pension expense of $1.1 billion during the nine months ended September 24, 2023 and 2022.
−Removed: Non-service FAS pension expense for the nine months ended September 25, 2022 includes a noncash, non-operating pension settlement charge of $1.5 billion ($1.2 billion, or $4.33 per share, after-tax), related to the transfer of $4.3 billion of our gross defined benefit pension obligations and related plan assets to an insurance company during the second quarter of 2022.
−Removed: Other Non-operating Income (Expense), Net
−Removed: Other non-operating income (expense), net primarily includes gains or losses related to changes in the fair value of early-stage company investments or gains or losses upon sale of these investments.
−Removed: Other non-operating income, net was $37 million compared to other non-operating expense, net of $26 million during the quarters ended September 24, 2023 and 2022.
−Removed: Other non-operating income, net was $69 million compared to other non-operating expense, net of $64 million during the nine months ended September 24, 2023 and 2022.
−Removed: Other non-operating income (expense), net for the quarter and nine months ended September 24, 2023 includes lower losses related to fair value adjustments of early-stage company investments and higher interest income compared to the same periods in 2022.
+Added: Interest expense was $255 million and $202 million during the quarters ended March 31, 2024 and March 26, 2023.
+Added: The increase in interest expense in 2024 resulted primarily from the issuance of senior unsecured notes in January 2024 and May 2023.
+Added: Non-Service FAS Pension Income
+Added: Non-service FAS pension income was $16 million and $110 million during the quarters ended March 31, 2024 and March 26, 2023.
+Added: The decrease was primarily due to a lower prior service credit amortization and a reduced asset base as detailed in “Note 6 - Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements.
+Added: Other Non-operating Income, Net
+Added: Other non-operating income, net primarily includes gains or losses related to changes in the fair value of early-stage company investments or gains or losses upon sale of these investments.
+Added: Other non-operating income, net was $45 million and $49 million during the quarters ended March 31, 2024 and March 26, 2023.
See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.
Income Tax Expense
−Removed: Our effective income tax rates were 13.8% and 15.1% for the quarter and nine months ended September 24, 2023 and 15.3% and 14.9% for the quarter and nine months ended September 25, 2022.
−Removed: The rate for the third quarter of 2023 was lower than the third quarter of 2022 primarily due to additional research and development tax credits for prior years.
−Removed: The rates for all periods benefited from research and development tax credits, tax deductions for foreign derived intangible income and dividends paid to our defined contribution plans with an employee stock ownership plan feature.
+Added: Our effective income tax rates were 15.8% and 15.3% for the quarters ended March 31, 2024 and March 26, 2023.
+Added: The rates for all periods benefited from research and development tax credits, tax deductions for foreign derived intangible income, dividends paid to our defined contribution plans with an employee stock ownership plan feature and employee equity awards.
Changes in U.S.
7 unchanged sentences
The final determination of tax audits and any related litigation could similarly result in unanticipated increases in our tax expense and affect profitability and cash flows.
−Removed: We reported net earnings of $1.7 billion ($6.73 per share) and $5.1 billion ($19.97 per share) during the quarter and nine months ended September 24, 2023, compared to $1.8 billion ($6.71 per share) and $3.8 billion ($14.31 per share) during the quarter and nine months ended September 25, 2022.
−Removed: Net earnings and earnings per share for the quarter and nine months ended September 24, 2023 were affected by the factors mentioned above.
−Removed: Earnings per share also benefited from a net decrease of approximately 14.9 million and 13.8 million weighted average common shares outstanding during the quarter and nine months ended September 24, 2023, compared to the same periods in 2022.
+Added: The Organisation for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2), with certain aspects of Pillar 2 effective January 1, 2024 and other aspects effective January 1, 2025.
+Added: While it is uncertain whether the U.S.
+Added: will enact legislation to adopt Pillar 2, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar 2.
+Added: We do not expect Pillar 2 to have a material impact on our effective tax rate or our consolidated results of operation, financial position, and cash flows.
+Added: We reported net earnings of $1.5 billion ($6.39 per share) during the quarter ended March 31, 2024, compared to $1.7 billion ($6.61 per share) during the quarter ended March 26, 2023.
+Added: Net earnings and earnings per share for the quarter ended March 31, 2024 were affected by the factors mentioned above.
+Added: Earnings per share also benefited from a net decrease of approximately 14.1 million weighted average common shares outstanding during the quarter ended March 31, 2024, compared to the same period in 2023.
The reduction in weighted average common shares was a result of share repurchases, partially offset by share issuance under our stock-based awards and certain defined contribution plans.
10 unchanged sentences
Sales and operating profit for each of our business segments were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 24,
−Removed: 2023 September 25,
−Removed: 2022 September 24,
−Removed: 2023 September 25,
+Added: Quarters Ended
+Added: 2024 March 26,
Aeronautics $ 6,845 $ 6,269
15 unchanged sentences
Total consolidated operating profit $ 2,029 $ 2,037
−Removed: Effective January 1, 2023, we no longer consider amortization expense related to purchased intangible assets when evaluating the operating performance of our business segments.
−Removed: This change has been applied to the accompanying amounts above, including the amounts for 2022.
−Removed: See “Note 1 - Basis of Presentation” included in our Notes to Consolidated Financial Statements for further information regarding the impact of this change on our current and prior period segment operating profit.
−Removed: We also included supplemental tables under the caption Pro Forma Business Segment Summary Operating Results in our earnings release included as exhibit 99.1 to our Current Report on Form 8-K filed January 24, 2023, which provide unaudited pro forma financial information reflecting the impact of the change in presentation as-if it had been applicable for the quarters and year to date periods in 2022 and 2021.
−Removed: The supplemental tables, the earnings release and the Current Report on Form 8-K are not, and shall not be deemed to be, incorporated by reference herein.
Our business segments’ results of operations include pension expense only as calculated under U.S.
6 unchanged sentences
As a result, to the extent that CAS pension cost exceeds the service cost component of FAS pension income (expense) we have a favorable FAS/CAS pension operating adjustment.
−Removed: The total FAS/CAS pension adjustments, including the service and non-service cost components of FAS pension income (expense) for our qualified defined benefit pension plans, were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 24,
−Removed: 2023 September 25,
−Removed: 2022 September 24,
−Removed: 2023 September 25,
−Removed: Total FAS income (expense) and CAS cost
−Removed: FAS pension income (expense) $ 94 $ 91 $ 283 $ (1,148)
+Added: The total FAS/CAS pension adjustments, including the service and non-service cost components of FAS pension income for our qualified defined benefit pension plans, were as follows (in millions):
+Added: Quarters Ended
+Added: 2024 March 26,
+Added: Total FAS income and CAS cost
+Added: FAS pension income $ 1 $ 94
CAS pension cost 421 431
4 unchanged sentences
Total FAS/CAS pension operating adjustment 406 415
−Removed: Non-service FAS pension income (expense) 111 111 332 (1,080)
+Added: Non-service FAS pension income 16 110
Total FAS/CAS pension adjustment $ 422 $ 525
10 unchanged sentences
We also may enter into long-term supply contracts for certain materials or components to coincide with the production schedule of certain products and to ensure their availability at known unit prices.
−Removed: Many of our contracts span several years and include highly complex technical requirements.
−Removed: At the outset of a contract, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract and assess the effects of those risks on our estimates of total costs to complete the contract.
−Removed: The estimates consider the technical requirements (e.g., a newly-developed product versus a mature product), the schedule and associated tasks (e.g., the number and type of milestone events) and costs (e.g., material, labor, subcontractor, overhead and the estimated costs to fulfill our industrial cooperation agreements, sometimes referred to as offset agreements, required under certain contracts with international customers).
−Removed: The initial profit booking rate of each contract considers risks surrounding the ability to achieve the technical requirements, schedule and costs in the initial estimated total costs to complete the contract and variable considerations.
−Removed: Profit booking rates may increase during the performance of the contract if we successfully retire risks related to the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract.
−Removed: Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase.
−Removed: All of the estimates are subject to change during the performance of the contract and may affect the profit booking rate.
−Removed: For further discussion on fixed-price contracts, see “Note 10 - Other” included in our Notes to Consolidated Financial Statements.
We have a number of programs that are designated as classified by the U.S.
3 unchanged sentences
Government as well as FMS contracted through the U.S.
−Removed: We recognize revenue as performance obligations
−Removed: are satisfied and the customer obtains control of the products and services.
+Added: We recognize revenue as performance obligations are satisfied and the customer obtains control of the products and services.
For performance obligations to deliver products with continuous transfer of control to the customer, revenue is recognized based on the extent of progress towards completion of the performance obligation, generally using the percentage-of-completion cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer as we incur costs on our contracts.
For performance obligations in which control does not continuously transfer to the customer, we recognize revenue at the point in time in which each performance obligation is fully satisfied.
−Removed: Changes in net sales and operating profit generally are expressed in terms of volume.
+Added: Many of our contracts span several years and include highly complex technical requirements.
+Added: At the outset of a contract accounted for under the percentage-of-completion cost-to-cost method, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract and assess the effects of those risks on our estimates of sales and total costs to complete the contract, as well as our ability to earn variable consideration.
+Added: The estimates consider the technical requirements (e.g., a newly-developed product versus a mature product), the schedule and associated tasks (e.g., the number and type of milestone events) and costs (e.g., material, labor, subcontractor, overhead and the estimated costs to fulfill our industrial cooperation agreements, sometimes referred to as offset or localization agreements, required under certain contracts with international customers).
+Added: The initial profit booking rate of each contract considers risks surrounding the ability to achieve the technical requirements, schedule and costs in the initial estimated total costs to complete the contract and variable considerations.
+Added: Profit booking rates may increase during
+Added: the performance of the contract if we successfully retire risks related to the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract or may increase the variable consideration we expect to receive on the contract.
+Added: Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase or our estimates of variable consideration we expect to receive decrease.
+Added: The profit booking rate may also be adjusted if the total estimated value of the contract changes or there is a contract modification.
+Added: All of the estimates are subject to change during the performance of the contract and may affect the profit booking rate.
+Added: For further discussion on fixed-price contracts, see “Note 10 - Other” included in our Notes to Consolidated Financial Statements.
+Added: Changes in net sales and operating profit generally are expressed in terms of volume, contract mix, and/or performance (referred to as profit booking rate adjustments).
Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts.
Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract.
+Added: Contract mix refers to changes in the ratio of contract type or life cycle (e.g., cost-type, fixed-price, development, production and/or sustainment).
Comparability of our segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on our contracts.
−Removed: Increases in the profit booking rates, typically referred to as favorable profit adjustments, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract.
−Removed: Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate and are typically referred to as unfavorable profit adjustments.
−Removed: Increases or decreases in profit booking rates are recognized in the period they are determined and reflect the inception-to-date effect of such changes.
−Removed: Segment operating profit and margin may also be impacted favorably or unfavorably by other items, which may or may not impact sales.
−Removed: Favorable items may include the positive resolution of contractual matters, cost recoveries on severance and restructuring, insurance recoveries and gains on sales of assets.
−Removed: Unfavorable items may include the adverse resolution of contractual matters;
+Added: Increases in the profit booking rates, typically referred to as favorable profit booking rate adjustments, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract.
+Added: Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate and are typically referred to as unfavorable profit booking rate adjustments.
+Added: Increases or decreases in profit booking rates are recognized in the current period they are determined and reflect the inception-to-date effect of such changes.
+Added: Segment operating profit and margin can be impacted favorably or unfavorably by, for example, certain items listed below, which may or may not impact sales.
+Added: Favorable items include the positive resolution of contractual matters, cost recoveries on severance and restructuring, insurance recoveries and gains on sales of assets.
+Added: Unfavorable items include the adverse resolution of contractual matters;
supply chain disruptions;
3 unchanged sentences
and losses on sales of certain assets.
−Removed: Our consolidated net profit booking rate adjustments increased segment operating profit by approximately $335 million and $1.1 billion during the quarter and nine months ended September 24, 2023 and $455 million and $1.3 billion during the quarter and nine months ended September 25, 2022.
+Added: Our consolidated net profit booking rate adjustments increased segment operating profit by approximately $195 million during the quarter ended March 31, 2024 and $415 million during the quarter ended March 26, 2023.
+Added: The impact to 2024 segment operating profit includes a reach-forward loss of $100 million recognized on a classified program at our MFC business segment (as further described on page 22, see the discussion under “Contract Estimates” in Note 10 - Other included in our Notes to Consolidated Financial Statements).
We periodically experience performance issues and record losses for certain programs.
−Removed: For further discussion on programs at Aeronautics and RMS, see “Note 10 - Other” included in our Notes to Consolidated Financial Statements.
−Removed: We have contracted with the Canadian Government for the Canadian Maritime Helicopter Program (CMHP) at our RMS business segment that provides for design, development, and production of CH-148 aircraft (the Original Equipment contract), which is a military variant of the S-92 helicopter, and for logistical support to the fleet (the In Service Support contract) over an extended time period.
−Removed: We are currently in discussions with the Canadian Government to potentially restructure certain contractual terms and conditions that may be beneficial to both parties.
−Removed: The program has experienced performance issues, including delays in the final aircraft deliveries from the original contract requirement, and the Royal Canadian Air Force’s flight hours have been less than originally anticipated, which has impacted program revenues and the recovery of our costs under this program.
−Removed: We have incurred significant costs and recognized the related sales, which are currently included in contract assets on the balance sheet.
−Removed: Such assets are recovered based on flight hours.
−Removed: Future sales and recovery of costs under the program are highly dependent upon achieving a certain number of flight hours, which are uncertain and dependent on aircraft availability and performance, and the availability of Canadian government resources.
−Removed: During the second quarter of 2023, due to increases in estimated costs for the production and lower than planned revenues for the logistical support program considering recent discussions with the customer and subsequent analysis, we recognized a loss of $100 million ($75 million, or $0.29 per share, after tax) on the program.
−Removed: Future performance issues, lower than forecast flight hours, or changes in our estimates due to the outcome of any restructuring discussions, including revised contract scope or customer requirements may further affect our ability to recover our costs, including the contract assets recognized on the balance sheet, or our assessment of the likelihood of cost recovery and may result in additional losses that could be material to our operating results.
−Removed: As of September 24, 2023, cumulative losses remained unchanged.
−Removed: We also have a number of contracts with Türkish industry for the Türkish Utility Helicopter Program (TUHP), which anticipates co-production with Türkish industry for production of T70 helicopters for use in Türkiye, as well as the related provision of Türkish goods and services under buy-back or offset obligations, to include the future sales of helicopters built in Türkiye for sale globally.
−Removed: In 2020, the U.S.
−Removed: Government imposed certain sanctions on Türkish entities and persons that have affected our ability to perform under the TUHP contracts and we have provided force majeure notices under the affected contracts.
−Removed: The TUHP contracts may be negotiated to be restructured or terminated, either in whole or in part,
−Removed: during which, we could be at risk of recording a reach-forward loss in future periods.
−Removed: Additionally, we could elect to pursue other relief or remedies, which could result in a further reduction in sales, the imposition of penalties or assessment of damages, and increased unrecoverable costs, which could have an adverse effect on our financial results.
−Removed: Our MFC business segment was previously awarded a competitively bid classified contract, which includes multiple phases of the program.
−Removed: We are currently performing on a phase which is primarily structured as cost-type.
−Removed: Additional phases are primarily fixed price and are not currently able to be awarded.
−Removed: If the additional phases are awarded at later dates, some of which could be within the next twelve months, we expect that those phases would be performed at a loss.
−Removed: We will continue to monitor the circumstances on the program and we may be required to recognize a reach-forward loss related to any additional phases at such time they become probable that they will be awarded.
−Removed: Any such losses could be material to our financial results.
+Added: For further discussion on programs, see “Note 10 - Other” included in our Notes to Consolidated Financial Statements.
Summary operating results for our Aeronautics business segment were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 24,
−Removed: 2023 September 25,
−Removed: 2022 September 24,
−Removed: 2023 September 25,
+Added: Quarters Ended
+Added: 2024 March 26,
Net sales $ 6,845 $ 6,269
1 unchanged sentence
Operating margin 9.9 % 10.8 %
−Removed: Aeronautics’ net sales during the quarter ended September 24, 2023 decreased $372 million, or 5%, compared to the same period in 2022.
−Removed: The decrease was primarily attributable to lower net sales of $525 million for the F-35 program due to lower volume on production contracts and the recognition in the third quarter 2022 of $325 million of sales deferred from the second quarter of 2022 until additional contractual authorization and funding was received on the Lot 15 contract.
−Removed: This decrease was partially offset by higher net sales of $125 million on classified programs due to higher volume.
−Removed: Aeronautics’ operating profit during the quarter ended September 24, 2023 decreased $88 million, or 12%, compared to the same period in 2022.
−Removed: The decrease was primarily attributable to lower operating profit of $115 million for the F-35 program due to lower volume and lower favorable profit adjustments on production contracts and the recognition of sales and associated operating profit in the third quarter of 2022 on the Lot 15 contract as described above.
−Removed: This decrease was partially offset by higher operating profit of $50 million on classified programs due to higher net favorable profit adjustments in 2023 and the absence in 2023 of unfavorable profit adjustments recorded in the third quarter of 2022.
−Removed: Total net profit booking rate adjustments were $80 million lower in the third quarter of 2023 compared to the same period in 2022.
−Removed: Aeronautics’ net sales in the nine months ended September 24, 2023 increased $509 million, or 3%, compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher net sales of $360 million on classified programs due to higher volume and higher net sales of $165 million for the F-16 program due to higher production volume.
−Removed: These increases were partially offset by lower net sales of $125 million for the F-35 program due to lower volume on production contracts partially offset by higher volume on sustainment and development contracts.
−Removed: Aeronautics’ operating profit in the nine months ended September 24, 2023 was comparable to the same period in 2022.
−Removed: Operating profit increased $80 million on classified programs due to higher volume and the absence in 2023 of unfavorable profit adjustments recorded in the third quarter of 2022.
−Removed: This increase was offset by lower operating profit of $75 million for the F-22 program due to lower net favorable profit adjustments.
−Removed: Total net profit booking rate adjustments were $95 million lower in the nine months ended September 24, 2023 compared to the same period in 2022.
+Added: Aeronautics’ net sales during the quarter ended March 31, 2024 increased $576 million, or 9%, compared to the same period in 2023.
+Added: The increase was primarily attributable to higher net sales of $305 million on the F-35 program due to higher volume on production, development and sustainment contracts;
+Added: $155 million on classified programs driven by higher volume;
+Added: and $60 million on the F-16 program due to the ramp up on production.
+Added: Aeronautics’ operating profit during the quarter ended March 31, 2024 was comparable to the same period in 2023.
+Added: Operating profit increased $50 million on the F-16 program as operating profit for the first quarter of 2023 reflects the impact of unfavorable profit adjustments on a production contract and sustainment contracts as a result of schedule delays related to software and technical specification risks that did not recur in the first quarter of 2024.
+Added: This increase was partially offset by lower operating profit of $30 million on the F-35 program primarily due to lower net profit adjustments on production contracts as a result of higher than anticipated material costs, partially offset by higher volume described above.
+Added: Total net profit booking rate adjustments were $40 million lower in the first quarter of 2024 compared to the same period in 2023.
Missiles and Fire Control
Summary operating results for our MFC business segment were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 24,
−Removed: 2023 September 25,
−Removed: 2022 September 24,
−Removed: 2023 September 25,
+Added: Quarters Ended
+Added: 2024 March 26,
Net sales $ 2,993 $ 2,388
1 unchanged sentence
Operating margin 10.4 % 15.8 %
−Removed: MFC’s net sales during the quarter ended September 24, 2023 increased $108 million, or 4%, compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher net sales of $125 million for tactical and strike missile programs due to higher volume (Guided Multiple Launch Rocket Systems (GMLRS) and High Mobility Artillery Rocket System (HIMARS)).
−Removed: These increases were partially offset by lower net sales of $60 million for integrated air and missile defense programs due to lower volume (Patriot Advanced Capability-3 (PAC-3)).
−Removed: MFC’s operating profit during the quarter ended September 24, 2023 increased $15 million, or 4%, compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher operating profit of $10 million for sensors and global sustainment programs due to higher net favorable profit adjustments (Apache).
−Removed: Operating profit for integrated air and missile defense programs was comparable to the same period in 2022 due to lower favorable profit adjustments (PAC-3) in 2023 offset by the absence in 2023 of a $40 million unfavorable profit adjustment on the Advanced Radar Threat System Variant 2 (ARTS-V2) program in the third quarter of 2022.
−Removed: Total net profit booking rate adjustments were $15 million higher in the third quarter of 2023 compared to the same period in 2022.
−Removed: MFC’s net sales in the nine months ended September 24, 2023 increased $52 million, or 1%, compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher net sales of $85 million for tactical and strike missile programs due to higher volume (Precision Strike Missile (PrSM)), partially offset by lower net sales of $80 million for sensors and global sustainment programs due to the absence in 2023 of the impact of a favorable profit adjustment on an international program as a result of a requirements modification in 2022.
−Removed: MFC’s operating profit in the nine months ended September 24, 2023 decreased $40 million, or 3%, compared to the same period in 2022.
−Removed: The decrease was primarily attributable to lower operating profit of $100 million for sensors and global sustainment programs due to the absence in 2023 of the favorable profit adjustment on an international program in 2022 as described above.
−Removed: This decrease was partially offset by higher operating profit of $50 million for integrated air and missile defense programs due to the absence in 2023 of a $40 million unfavorable profit adjustment on the ARTS-V2 program in the third quarter of 2022.
−Removed: Total net profit booking rate adjustments were approximately $65 million lower in the nine months ended September 24, 2023 compared to the same period in 2022.
+Added: MFC’s net sales during the quarter ended March 31, 2024 increased $605 million, or 25%, compared to the same period in 2023 .
+Added: The increase was primarily attributable to higher net sales of $460 million for tactical and strike missile programs due to production ramp up on GMLRS, HIMARS , JASSM and LRASM programs;
+Added: and $100 million for integrated air and missile defense programs primarily due to higher volume on PAC-3 and Terminal High Altitude Area Defense (THAAD).
+Added: MFC’s operating profit during the quarter ended March 31, 2024 decreased $66 million , or 18%, compared to the same period in 2023.
+Added: The decrease was primarily attributable to lower operating profit for tactical and strike missile programs due to a $100 million reach-forward loss recognized for an option on a classified program and an unfavorable profit adjustment on HELLFIRE as a result of additional costs expected to be incurred associated with a contract claim, partially offset by the production ramp up described above.
+Added: Total net profit booking rate adjustments, inclusive of the $100 million loss described above, were $120 million lower in the first quarter of 2024 compared to the same period in 2023.
Rotary and Mission Systems
+Added: In February 2024, the U.S.
+Added: Army announced it is cancelling the Future Attack Reconnaissance Aircraft (FARA) program at the conclusion of fiscal year 2024, for which our Sikorsky business was competing.
+Added: We are currently evaluating the potential effect of this decision on our Sikorsky business operations including assessing the recoverability of certain assets.
Summary operating results for our RMS business segment were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 24,
−Removed: 2023 September 25,
−Removed: 2022 September 24,
−Removed: 2023 September 25,
+Added: Quarters Ended
+Added: 2024 March 26,
Net sales $ 4,088 $ 3,510
1 unchanged sentence
Operating margin 10.5 % 10.0 %
−Removed: RMS’ net sales during the quarter ended September 24, 2023 increased $340 million, or 9%, compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher net sales of $235 million for IWSS programs due to new program ramp up (Defense of Guam, Indirect Fire Protection Capability High Energy Laser (IFPC-HEL) and TPY-4 programs) and higher volume (Aegis);
−Removed: and higher net sales of $60 million on C6IRSR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to higher volume.
−Removed: RMS’ operating profit during the quarter ended September 24, 2023 increased $10 million, or 2%, compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher operating profit of $50 million for IWSS programs due to higher favorable profit adjustments (Littoral Combat Ship (LCS)) and new program ramp up (Defense of Guam, IFPC-HEL and TPY-4 programs).
−Removed: This increase was partially offset by lower operating profit of $35 million for Sikorsky
−Removed: helicopter programs due to lower favorable profit adjustments (Combat Rescue Helicopter (CRH) and Black Hawk).
−Removed: Total net profit booking rate adjustments were $25 million lower in the third quarter of 2023 compared to the same period in 2022.
−Removed: RMS’ net sales in the nine months ended September 24, 2023 increased $183 million, or 2%, compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher net sales of $380 million for IWSS programs due to higher volume (Aegis) and new program ramp up (Defense of Guam and TPY-4 programs), partially offset by lower net sales of $190 million for Sikorsky helicopter programs due to lower production volume (Black Hawk).
−Removed: RMS’ operating profit in the nine months ended September 24, 2023 decreased $53 million, or 4%, compared to the same period in 2022.
−Removed: The decrease was primarily attributable to lower operating profit of $160 million for Sikorsky helicopter programs due to an unfavorable profit adjustment of $100 million in the second quarter of 2023 on the CMHP as a result of increases in estimated costs and lower than planned revenues and lower production volume (Black Hawk).This decrease was partially offset by higher operating profit of $140 million for IWSS programs primarily due to the favorable profit adjustment of $65 million in second quarter of 2023 as a result of a positive resolution of a contractual matter on an international surveillance and control program, along with higher volume (Aegis) and higher favorable profit adjustments (LCS).
−Removed: Total net profit booking rate adjustments were $100 million lower in the nine months ended September 24, 2023 compared to the same period in 2022.
+Added: RMS’ net sales during the quarter ended March 31, 2024 increased $578 million , or 16%, compared to the same period in 2023.
+Added: The increase was primarily attributable to higher net sales of $295 million on integrated warfare systems and sensors (IWSS) programs due to new program ramp up within the laser systems portfolio and higher volume on the Aegis and radar programs;
+Added: $150 million for various C6ISR programs due to higher volume;
+Added: and $100 million for Sikorsky helicopter programs due to higher volume on Seahawk and CH-53K programs.
+Added: RMS’ operating profit during the quarter ended March 31, 2024 increased $80 million , or 23%, compared to the same period in 2023.
+Added: The increase was primarily attributable to higher operating profit of $40 million on IWSS programs due to higher volume described above and a favorable profit rate adjustment as a result of the delivery of a ground-based radar which retired the technical risk;
+Added: and $25 million on Sikorsky helicopter programs due to higher volume described above and higher margins due to contract mix, partially offset by unfavorable profit adjustments on Seahawk programs.
+Added: profit booking rate adjustments were $30 million lower in the first quarter of 2024 compared to the same period in 2023.
Summary operating results for our Space business segment were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 24,
−Removed: 2023 September 25,
−Removed: 2022 September 24,
−Removed: 2023 September 25,
+Added: Quarters Ended
+Added: 2024 March 26,
Net sales $ 3,269 $ 2,959
1 unchanged sentence
Operating margin 9.9 % 9.5 %
−Removed: Space’s net sales during the quarter ended September 24, 2023 increased $219 million, or 8%, compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher net sales of $135 million for strategic and missile defense programs due to higher volume (NGI development and FBM);
−Removed: higher net sales of $45 million for national security space programs due to higher volume (GPS III);
−Removed: and higher net sales of $40 million for commercial civil space programs due to higher volume (Orion).
−Removed: Space’s operating profit during the quarter ended September 24, 2023 decreased $45 million, or 15%, compared to the same period in 2022.
−Removed: The decrease was primarily attributable to $35 million of lower equity earnings from ULA due to lower launch volume.
−Removed: Total net profit booking rate adjustments were $30 million lower in the third quarter of 2023 compared to the same period in 2022.
−Removed: Spa ce’s net sales in the nine months ended September 24, 2023 increased $960 million, or 12%, compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher net sales of $470 million for strategic and missile defense programs due to higher volume (NGI development and FBM);
−Removed: higher net sales of $335 million for national security space programs due to higher volume (GPS III, Transport Layer development and classified development programs);
−Removed: and higher net sales of $160 million for commercial civil space programs due to higher volume and higher favorable profit adjustments (Orion).
−Removed: Space’s operating profit in the nine months ended September 24, 2023 increased $28 million, or 3%, compared to the same period in 2022.
−Removed: The increase was primarily attributable to higher operating profit of $80 million for national security space programs due to higher net favorable profit adjustments (classified programs and Next Generation Overhead Persistent Infrared (Next Gen OPIR)).This increase was partially offset by $65 million of lower equity earnings from ULA due to lower launch volume and an increase in new product development costs.
−Removed: Total net profit booking rate adjustments were $60 million higher in the nine months ended September 24, 2023 compared to the same period in 2022.
−Removed: Total equity earnings (primarily ULA) represented approximately $15 million, or 6%, and $20 million, or 2%, of Space's operating profit during the quarter and nine months ended September 24, 2023, compared to approximately $50 million, or 16%, and $85 million, or 10%, during the quarter and nine months ended September 25, 2022.
+Added: Space’s net sales during the quarter ended March 31, 2024 increased $310 million , or 10%, compared to the same period in 2023.
+Added: The increase was primarily attributable to higher net sales of $140 million for strategic and missile defense programs due to higher volume on FBM and ramp up in the hypersonic and Next Generation Interceptor (NGI) development programs;
+Added: and higher net sales of $115 million for national security space programs due to higher volume on Transport Layer and GPS III programs and ramp up on the Tracking Layer program.
+Added: Space’s operating profit during the quarter ended March 31, 2024 increased $45 million , or 16%, compared to the same period in 2023.
+Added: The increase was primarily attributable to $30 million of higher equity earnings from our investment in United Launch Alliance (ULA) due to higher launch volume, and higher operating profit of $20 million on strategic and missile defense programs due to the higher volume described above.
+Added: These increases were partially offset by lower operating profit of $25 million for national security space programs due to the impact of lower net favorable profit adjustments on Next Gen OPIR as a result of the timing of the award and incentive fee assessments.
+Added: Total net profit booking rate adjustments were $30 million lower in the first quarter of 2024 compared to the same period in 2023.
+Added: Total equity earnings/(losses) (primarily ULA) represented approximately $15 million or 5% in the first quarter of 2024, compared to approximately $(15) million, or (5)% for the same period in 2023.
FINANCIAL CONDITION
−Removed: Liquidity and Cash Flows
−Removed: At September 24, 2023, we had cash and cash equivalents of $3.6 billion.
+Added: Liquidity and Capital Resources
+Added: At March 31, 2024, we had cash and cash equivalents of $2.8 billion that was generally available to fund ordinary business operations without significant legal, regulatory or other restrictions.
Our principal source of liquidity is our cash from operations.
1 unchanged sentence
This access includes our $3.0 billion revolving credit facility or the ability to issue commercial paper and letters of credit to support customer advance payments and for other trade finance purposes such as guaranteeing our performance on particular contracts.
+Added: There were no borrowings outstanding under the revolving credit facility and commercial paper at both March 31, 2024 and December 31, 2023.
+Added: As of March 31, 2024, we were in compliance with all covenants contained in our debt and credit agreements.
We believe our cash and cash equivalents, our expected cash flow generated from operations and our access to credit markets will be sufficient to meet our cash requirements and cash deployment plans over the next twelve months and beyond based on our current business plans.
−Removed: Cash received from customers, either from the payment of invoices for work performed or for advances from non-U.S.
−Removed: government customers in excess of costs incurred, is our primary source of cash from operations.
+Added: Cash received from customers is our primary source of cash from operations.
We generally do not begin work on contracts until funding is appropriated by the customer.
2 unchanged sentences
Billing timetables and payment terms on our contracts vary based on a number of factors, including the contract type.
−Removed: We generally bill and collect cash more frequently under cost-reimbursable contracts, which represented approximately 41% of the sales we recorded during the quarter ended September 24, 2023, as we are authorized to bill as the costs are incurred.
+Added: We generally bill and collect cash more frequently under cost-reimbursable contracts, which represented approximately 42% of the sales we recorded during the quarter ended March 31, 2024, as we are authorized to bill as the costs are incurred.
A number of our fixed-price contracts may provide for performance-based payments, which allow us to bill and collect cash as we perform on the contract.
−Removed: The amount of performance-based payments and the related milestones are encompassed in the negotiation of each contract.
+Added: The amount of performance-based payments and the related milestones are
+Added: encompassed in the negotiation of each contract.
The timing of such payments may differ from the timing of the costs incurred related to our contract performance, thereby affecting our cash flows.
3 unchanged sentences
Government changes its payment policies.
−Removed: For example, the U.S.
−Removed: Government increased the progress payment rate applicable to us from 80% to 90% at the beginning of the COVID-19 pandemic.
−Removed: Effective July 2023, this policy was rescinded and all new contracts executed will revert back to the 80% progress payment rate.
−Removed: Due to our cash deployment practices, we do not anticipate a material impact to our cash flows as a result of this change.
−Removed: In addition, the U.S.
Government from time to time withholds payments on certain of our billings based on contract terms or regulatory provisions.
Ultimately, the impact of policy changes or withholding payments may delay the receipt of cash, but the cumulative amount of cash collected during the life of the contract should not vary.
−Removed: Additionally, during the COVID-19 pandemic, we accelerated payments to the supply chain with a focus on small and at-risk businesses.
−Removed: We will continue to evaluate the use of accelerated payments on an as needed basis.
−Removed: We have a balanced cash deployment strategy to invest in our business and key technologies to provide our customers with enhanced capabilities, enhance stockholder value, and position ourselves to take advantage of new business opportunities when they arise.
+Added: We have a disciplined and dynamic cash deployment strategy to invest in our business and key technologies to provide our customers with enhanced capabilities, enhance stockholder value, and position ourselves to take advantage of new business opportunities when they arise.
Consistent with that strategy, we have continued to invest in our business and technologies through capital expenditures, independent research and development, and selective business acquisitions and investments.
−Removed: We have returned cash to stockholders through dividends and share repurchases.
−Removed: In October 2023, the Board of Directors authorized a fourth quarter dividend payment of $3.15 per share, representing an increase of $0.15 per share over the prior quarterly dividend payment.
−Removed: The Board of Directors also authorized an increase of $6.0 billion to our share repurchase program in addition to the $7.0 billion remaining in authorization as of September 24, 2023.
−Removed: We currently expect that the authorization amount will be utilized for share repurchases through 2026.
−Removed: We expect to fund the repurchases through a combination of cash on hand and the issuance of debt.
+Added: We continue to return cash to stockholders through dividends and share repurchases.
+Added: As of March 31, 2024, the total remaining authorization for future common share repurchases under our program was $9.0 billion.
The stock repurchase program does not have an expiration date and may be amended or terminated by the Board of Directors at any time.
1 unchanged sentence
We continue to actively manage our debt levels, including maturities and interest rates.
−Removed: We also actively manage our pension obligations and expect to continue to opportunistically manage our pension liabilities through the purchase of
−Removed: group annuity contracts or other actions for portions of our outstanding defined benefit pension obligations using assets from the pension trust.
−Removed: See “Note 6 - Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements for additional information.
−Removed: Future pension risk transfer transactions could be significant and result in us making additional contributions to the pension trust and/or require us to recognize noncash, non-operating pension settlement charges in earnings in the applicable reporting period.
−Removed: There were no material changes during the quarter or nine months ended September 24, 2023 to our contractual commitments as presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2022 Form 10-K that were outside the ordinary course of our business.
+Added: We actively seek to finance our business in a manner that preserves financial flexibility while minimizing borrowing costs to the extent practicable.
+Added: We review changes in financial market and economic conditions to manage the types, amounts and maturities of our indebtedness.
+Added: We may at times refinance existing indebtedness, vary our mix of variable-rate and fixed-rate debt or seek alternative financing sources for our cash and operational needs.
+Added: We also actively manage our pension obligations and expect to continue to opportunistically manage our pension liabilities through the purchase of group annuity contracts or other actions for portions of our outstanding defined benefit pension obligations using assets from the pension trust.
+Added: Future pension risk transfer transactions could be significant and result in us making additional contributions to the pension trust.
+Added: The required funding of our qualified defined benefit pension plans is determined in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), as amended, and Cost Accounting Standards (CAS).
+Added: We could be required to make pension contributions earlier and/or in excess than planned if our return on pension assets is less than our assumptions, which would reduce our free cash flow.
+Added: We may also make additional contributions on an ad hoc basis at our discretion.
+Added: There were no material changes during the quarter ended March 31, 2024 to our contractual commitments as presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Form 10-K that were outside the ordinary course of our business.
The following table provides a summary of our cash flow information followed by a discussion of the key elements (in millions):
−Removed: Nine Months Ended
−Removed: September 24,
−Removed: 2023 September 25,
+Added: Quarters Ended
+Added: 2024 March 26,
Cash and cash equivalents at beginning of year $ 1,442 $ 2,547
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Net cash used for investing activities (372) (259)
−Removed: Net cash used for financing activities (3,560) (6,067)
+Added: Net cash provided by (used for) financing activities 85 (1,412)
Net change in cash and cash equivalents 1,348 (107)
1 unchanged sentence
Operating Activities
−Removed: Net cash provided by operating activities during the nine months ended September 24, 2023 decreased $319 million compared to the same period in 2022.
−Removed: T he decrease was primarily due to the timing of federal tax payments.
+Added: Net cash provided by operating activities during the quarter ended March 31, 2024 was comparable to the same period in 2023.
Non-GAAP Financial Measure - Free Cash Flow
6 unchanged sentences
The following table reconciles net cash provided by operating activities to free cash flow (in millions):
−Removed: Nine Months Ended
−Removed: September 24,
−Removed: 2023 September 25,
+Added: Quarters Ended
+Added: 2024 March 26,
Cash from operations $ 1,635 $ 1,564
2 unchanged sentences
Investing Activities
−Removed: Net cash used for investing activities during the nine months ended September 24, 2023 was comparable to the same period in 2022.
−Removed: Capital expenditures totaled $987 million and $977 million during the nine months ended September 24, 2023 and September 25, 2022.
+Added: Net cash used for investing activities during the quarter ended March 31, 2024 increased $113 million compared to the same period in 2023 .
+Added: Capital expenditures totaled $378 million and $294 million during the quarters ended March 31, 2024 and March 26, 2023.
The majority of our capital expenditures are for equipment and facilities infrastructure that generally are incurred to support new and existing programs across all of our business segments.
1 unchanged sentence
Financing Activities
−Removed: Net cash used for financing activities was $3.6 billion during the nine months ended September 24, 2023, compared to $6.1 billion during the same period in 2022.
−Removed: During the nine months ended September 24, 2023 and September 25, 2022, we paid dividends totaling $2.3 billion ($9.00 per share) and $2.3 billion ($8.40 per share).
−Removed: During the nine months ended September 24, 2023, we paid $3.0 billion to repurchase 6.7 million shares of our common stock.
+Added: Net cash provided by financing activities during the quarter ended March 31, 2024 increased $1.5 billion compared to the same period in 2023 .
+Added: During the quarter ended March 31, 2024 and March 26, 2023, we paid dividends totaling $780 million ($3.15 per share) and $784 million ($3.00 per share).
+Added: During the quarter ended March 31, 2024, we paid $1.0 billion to repurchase 2.3 million shares of our common stock.
See “Note 9 - Stockholders’ Equity” included in our Notes to Consolidated Financial Statements for additional information.
−Removed: During the nine months ended September 25, 2022, we paid $3.7 billion to repurchase 11.1 million shares of our common stock.
−Removed: During the nine months ended September 24, 2023, we received net proceeds of $2.0 billion from issuance of senior unsecured notes.
+Added: During the quarter ended March 26, 2023, we paid $500 million to repurchase 1.1 million shares of our common stock.
+Added: During the quarter ended March 31, 2024, we received net proceeds of $2.0 billion from issuance of senior unsecured notes.
See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.
−Removed: During the nine months ended September 25, 2022, we received net proceeds of $2.3 billion from issuance of senior unsecured notes and used the net proceeds from the offering to redeem all of the outstanding $500 million Notes due 2023, $750 million Notes due 2025 and used the remaining balance of the net proceeds to redeem $1.0 billion of our
−Removed: outstanding $2.0 billion Notes due 2026.
−Removed: During the nine months ended September 24, 2023, we repaid $115 million of long-term notes with a fixed interest rate of 7.00% according to their scheduled maturities.
−Removed: Capital Resources
−Removed: At September 24, 2023, we held cash and cash equivalents of $3.6 billion that was generally available to fund ordinary business operations without significant legal, regulatory or other restrictions.
−Removed: At September 24, 2023, we had a $3.0 billion revolving credit facility (the Revolving Credit Facility) with various banks that is available for general corporate purposes including supporting commercial paper borrowings.
−Removed: Effective August 24, 2023, we extended the expiration date of the Revolving Credit Facility from August 24, 2027 to August 24, 2028.
−Removed: We may request and the banks may grant, at their discretion, an increase in the borrowing capacity under the Revolving Credit Facility of up to an additional $500 million.
−Removed: There were no borrowings outstanding under the Revolving Credit Facility at September 24, 2023.
−Removed: We have agreements in place with financial institutions to provide for the issuance of commercial paper.
−Removed: The outstanding balance of commercial paper can fluctuate daily and the amount outstanding during the period may be greater than or less than the amount reported at the end of the period.
−Removed: There were no commercial paper borrowings outstanding as of September 24, 2023 and December 31, 2022.
−Removed: We may, as conditions warrant, from time to time issue commercial paper backed by our Revolving Credit Facility to manage the timing of cash flows.
−Removed: However, depending on market conditions, commercial paper may not be available on favorable terms or at all.
−Removed: Our total outstanding short-term and long-term debt, net of unamortized discounts and issuance costs was $17.4 billion as of September 24, 2023 and is in the form of publicly-issued notes that bear interest at fixed rates.
−Removed: We use variable interest rate swaps to convert a portion of the fixed rate borrowings to variable rate borrowings, see “Note 8 – Fair Value Measurements” included in our Notes to Consolidated Financial Statements for additional information.
−Removed: As of September 24, 2023, we were in compliance with all covenants contained in our debt and credit agreements.
−Removed: We actively seek to finance our business in a manner that preserves financial flexibility while minimizing borrowing costs to the extent practicable.
−Removed: We review changes in financial market and economic conditions to manage the types, amounts and maturities of our indebtedness.
−Removed: We may at times refinance existing indebtedness, vary our mix of variable-rate and fixed-rate debt or seek alternative financing sources for our cash and operational needs.
OTHER MATTERS
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Production of the aircraft is expected to continue for many years given the U.S.
−Removed: Government’s current inventory objective of 2,456 aircraft for the U.S.
+Added: Government’s objective of 2,456 aircraft for the U.S.
Air Force, U.S.
Marine Corps, and U.S.
−Removed: commitments from our seven international partner countries and nine Foreign Military Sales (FMS) customers;
+Added: commitments from our seven international partner countries and ten Foreign Military Sales (FMS) customers;
as well as interest from other countries.
We continue to see strong international demand for the F-35.
−Removed: The Government of Canada announced in January 2023 their commitment to purchase 88 F-35 aircraft.
−Removed: In February 2023, the Government of Singapore announced its intent to exercise an option to purchase an additional eight F-35 aircraft, increasing its total quantity to 12.
−Removed: In September 2023, the Israel Defense Ministry submitted an official letter of request to advance Israel’s procurement of a third F-35 squadron, increasing their total quantity of aircraft from 50 to 75.
−Removed: Also in September 2023, the U.S.
−Removed: Department of State formally approved the sale of up to 25 more F-35s to South Korea, beyond the currently approved purchase of 40 aircraft.
−Removed: During the third quarter of 2023, we delivered 30 aircraft, bringing year-to-date 2023 deliveries to 80, and ended the quarter with a backlog of 391 aircraft.
−Removed: Since program inception through the third quarter of 2023, we have delivered 974 production F-35 aircraft to U.S.
−Removed: and international customers, including 703 F-35A variants, 191 F-35B variants, and 80 F-35C variants, demonstrating the F-35 program’s continued progress and longevity.
−Removed: During the third quarter of 2023, we updated our F-35 Technology Refresh 3 (“TR-3”) schedule projections and we currently anticipate delivering the first TR-3 aircraft between April and June 2024.
−Removed: As a result, we now expect to deliver 97 aircraft in 2023 (all in the TR-2 configuration), which we do not currently anticipate will impact our 2023 financial outlook.
−Removed: We are producing F-35s at a rate of 156 per year and expect to continue at that pace while simultaneously working to finalize TR-3 software development and testing.
+Added: In December 2023, the Republic of Korea announced it signed a follow-on Letter of offer and acceptance (LOA) for 20 additional F-35s, increasing its program of record from 40 to 60.
+Added: In January 2024, the Czech Republic signed a LOA to procure 24 F-35s and the U.S.
+Added: Department of State approved a potential Foreign Military Sale to Greece for up to 40 F-35s.
+Added: In February 2024, Singapore announced its intent to purchase eight F-35As to complement the 12 F-35Bs to which it has previously committed.
+Added: Since program inception through March 31, 2024, we have delivered 992 production F-35 aircraft, including 710 F-35A variants, 197 F-35B variants and 85 F-35C variants, demonstrating the F-35 program’s continued progress and longevity.
+Added: Our backlog as of March 31, 2024 was 373 aircraft and our aircraft production rate remains at approximately 156 per year;
+Added: however, we had no customer deliveries of aircraft in the first quarter of 2024.
+Added: Deliveries of aircraft with Technology Refresh-3 (TR-3) capability remain on hold as the software is finalized.
+Added: We continue to target a second quarter 2024 customer acceptance of a specific software configuration permitting deliveries of TR-3 aircraft and expect deliveries to begin in the third quarter 2024.
Additionally, we remain focused on receiving the necessary hardware from our suppliers to deliver this critical combat capability for the F-35.
−Removed: Given the size and complexity of the F-35 program, we anticipate that there will be continual reviews related to aircraft performance, program, and delivery schedule, cost, and requirements as part of the DoD, Congressional, and international countries’ oversight, and budgeting processes.
−Removed: Current program challenges include our and our suppliers’ performance, software development (including, in particular, software maturation related to the TR-3 configuration), execution of future flight tests and findings resulting from testing and operating the aircraft, the level of cost associated with life cycle operations, sustainment and potential contractual obligations, inflation-related cost pressures, and the ability to improve affordability.
+Added: Given the size and complexity of the F-35 program, we anticipate continual reviews on aircraft performance, program and delivery schedule, cost and requirements as part of the DoD, Congressional and international countries’ oversight and budgeting processes.
+Added: Areas of focus include Lockheed Martin’s and our suppliers’ performance, software development (including, in particular, software maturation related to TR-3 capability), and flight test execution and related findings.
+Added: Additional areas of focus include the level of cost associated with life cycle operations, sustainment and potential contractual obligations, inflation-related cost pressures, and the ability to increase affordability.
Contingencies
3 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.