LOCKHEED MARTIN CORP

Previous wording

We are a global defense technology company driving innovation and advancing scientific discovery. Our all-domain mission solutions and 21st Century Security vision accelerate the delivery of transformative technologies to our customers. 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. Our main areas of focus are in defense, space, intelligence, homeland security and information technology, including cybersecurity. We serve both U.S. and international customers with products and services that have defense, civil and commercial applications, with our principal customers being agencies of the U.S. Government. During the six months ended June 30, 2024, 74% of our $35.3 billion in net sales were from the U.S. Government, either as a prime contractor or as a subcontractor (including 65% from the Department of Defense (DoD)), 25% were from international customers (including foreign military sales (FMS) contracted through the U.S. Government) and 1% were from U.S. commercial and other customers.

Current wording

We are a global defense technology company driving innovation and advancing scientific discovery. Our all-domain mission solutions and 21 st Century Security vision accelerate the delivery of transformative technologies to our customers. 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. Our main areas of focus are in defense, space, intelligence, homeland security and information technology, including cybersecurity. We serve both U.S. and international customers with products and services that have defense, civil and commercial applications, with our principal customers being agencies of the U.S. Government. During the nine months ended September 29, 2024, 74% of our $52.4 billion in net sales were from the U.S. Government, either as a prime contractor or as a subcontractor (including 65% from the Department of Defense (DoD)), 25% were from international customers (including foreign military sales (FMS) contracted through the U.S. Government) and 1% were from U.S. commercial and other customers.

Previous wording

On March 22, 2024, the President signed the second Fiscal Year (FY) 2024 Consolidated Appropriations package into law, which includes the DoD funding. 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.

Current wording

On March 22, 2024, the President signed the second Fiscal Year (FY) 2024 Consolidated Appropriations package into law, which includes the DoD funding. This legislation reflects the Fiscal Responsibility Act of 2023 (FRA) spending limit of $886 billion for National Defense, of which $842 billion was for the DoD base budget.

Previous wording

In the coming months, Congress will need to approve or revise the President’s FY 2025 budget proposal through enactment of appropriations bills and other policy legislation, which would then require final approval from the President in order for the FY 2025 budget to become law and complete the budget process.

Current wording

In the coming months, Congress will need to approve or revise the President’s FY 2025 budget proposal through enactment of appropriations bills and other policy legislation, which would then require final approval from the President in order for the FY 2025 budget process to conclude. A Continuing Resolution (CR) passed the House and Senate on September 25, 2024 and was signed by the President on September 26, 2024. The bill funds U.S. Government operations through December 20, 2024. After the November 2024 election, Congress will return to the task of funding the U.S. Government for the balance of the FY 2025. Significant differences that must be resolved include the different allocations as noted above and policy matters that arose during consideration of the CR and the underlying bills.

Previous wording

We operate in a complex and evolving global security environment and our business is affected by geopolitical and security issues. 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. In this context, the U.S. 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. Government and its allies to Ukraine has increased U.S. Government and allied demand to replenish U.S. stockpiles, resulting in additional and potential future orders, including for the ramp-up in production capacity for certain products. We continue to expect additional orders over the next several years attributable to the global threat environment. We operate primarily in a long-cycle business and the U.S. government has been focused on increasing industry capacity to meet demand. 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. Government and our supply chain to evaluate increases in capacity at our operations to anticipate potential demand and enable us to deliver critical capabilities.

Current wording

We operate in a complex and evolving global security environment and our business is affected by geopolitical and security issues. 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. In this context, the U.S. 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. Government and its allies to Ukraine has increased U.S. Government and allied demand to replenish U.S. stockpiles, resulting in additional and potential future orders, including for the ramp-up in production capacity for certain products. We continue to expect additional orders over the next several years attributable to the global threat environment. We operate primarily in a long-cycle business and the U.S. Government has been focused on increasing industry capacity to meet demand. We continue to work with the U.S. Government and our supply chain to evaluate increases in capacity at our operations to anticipate potential demand and enable us to deliver critical capabilities.

Previous wording

Our business and financial performance is also affected by general economic conditions. We continue to experience supply chain challenges, including supplier shortages and performance issues. 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. 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. 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. In addition, some suppliers are reducing the duration of pricing validity of their proposals to us or seeking to reopen pricing on existing agreements, which is operationally challenging and increases the risk of cost volatility. 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, enforcing existing contract terms, identifying alternative sources, collaborating with our customer to address industry-wide challenges, and optimizing our supply chain organization through digital transformation and workforce development. 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. 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.

Current wording

Our business and financial performance is also affected by general economic conditions. We continue to experience supply chain challenges, including supplier shortages and performance issues. 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. In addition, elevated levels of inflation and macroeconomic conditions present risks for us, our suppliers and the stability of the broader defense industrial base. 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. In addition, some suppliers are reducing the duration of pricing validity of their proposals to us or seeking to reopen pricing on existing agreements, which is operationally challenging and increases the risk of cost volatility. 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, enforcing existing contract terms, identifying alternative sources, collaborating with our customers to address industry-wide challenges, and optimizing our supply chain organization through digital transformation and workforce development. 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. 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.

Previous wording

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. Accordingly, such amounts are included in the discussion of our business segment results of operations.

Current wording

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.

Previous wording

Product sales increased $1.4 billion, or 10%, during the quarter ended June 30, 2024, compared to the same period in 2023. The increase was primarily attributable to higher product sales of $665 million at RMS, $330 million at MFC, and $325 million at Aeronautics. Higher product sales at RMS were due to new program ramp up within the laser systems portfolio and higher volume on radar, Black Hawk and CH-53K programs. Higher product sales at MFC were due to production ramp up on Guided Multiple Launch Rocket Systems (GMLRS), and Long Range Anti-Ship Missile (LRASM) programs. Higher product sales at Aeronautics were due to higher volume on F-35 production contracts.

Current wording

Product sales increased $3.5 billion, or 9%, during the nine months ended September 29, 2024, compared to the same period in 2023. The increase was primarily attributable to higher product sales of $1.4 billion at RMS, $1.1 billion at MFC and $775 million at Aeronautics. Higher product sales at RMS were primarily within the IWSS portfolio due to higher volume on radar programs and new program ramp up within the laser systems portfolio. Higher product sales at MFC were due to production ramp up on GMLRS, High Mobility Artillery Rocket System (HIMARS), Joint Air-to-Surface Standoff Missile (JASSM) and LRASM programs. Higher product sales at Aeronautics were due to higher volume on F-35 and F-16 production contracts along with growth on classified programs.

Previous wording

Service sales increased $78 million, or 3%, during the quarter ended June 30, 2024, compared to the same period in 2023. The increase was primarily attributable to higher service sales of approximately $75 million at Aeronautics due to higher volume on F-35 and C-130 sustainment contracts.

Current wording

Service sales decreased $232 million, or 8%, during the quarter ended September 29, 2024, compared to the same period in 2023. The decrease was primarily attributable to lower service sales of approximately $240 million at Aeronautics due to lower volume on F-35 sustainment contracts.

Previous wording

Service sales increased $477 million, or 9%, during the six months ended June 30, 2024, compared to the same period in 2023. The increase was primarily attributable to higher service sales of approximately $215 million at Aeronautics, $115 million at RMS, and $100 million at Space. Higher service sales at Aeronautics were due to higher volume on C-130 and F-35 sustainment contracts. Higher service sales at RMS were due to higher volume on various C6ISR programs. Higher service sales at Space were due to higher volume on national security space services.

Current wording

Service sales increased $245 million, or 3%, during the nine months ended September 29, 2024, compared to the same period in 2023. The increase was primarily attributable to higher service sales of approximately $135 million at Space and $55 million at RMS. Higher service sales at Space were due to higher volume on national security space services, while higher service sales at RMS were due to higher volume across the portfolio.

Previous wording

Product costs increased $1.3 billion, or 10%, during the quarter ended June 30, 2024, compared to the same period in 2023. The increase was primarily attributable to higher product costs of approximately $685 million at RMS, $305 million at Aeronautics, and $275 million at MFC due to higher volume and production ramp up as described above in “Product Sales”.

Current wording

Product costs increased $393 million, or 3%, during the quarter ended September 29, 2024, compared to the same period in 2023. The increase was primarily attributable to higher product costs of approximately $290 million at RMS and $145 million at MFC due to higher volume and production ramp up as described above in “Product Sales”.

Previous wording

Product costs increased $3.0 billion, or 13%, during the six months ended June 30, 2024, compared to the same period in 2023. The increase was primarily attributable to higher product costs of approximately $1.1 billion at RMS, $925 million at MFC, $765 million at Aeronautics and $240 million at Space due to production ramp up and higher volume as described above in “Product Sales”.

Current wording

Product costs increased $3.4 billion, or 9%, during the nine months ended September 29, 2024, compared to the same period in 2023. The increase was primarily attributable to higher product costs of approximately $1.4 billion at RMS, $1.1 billion at MFC and $795 million at Aeronautics. Higher product costs at RMS and MFC were due to production ramp up and higher volume as described above in “Product Sales”. Higher product costs at Aeronautics was due to higher volume as described above in “Product Sales” and unfavorable profit rate adjustments on a classified program because of higher than anticipated costs to achieve program objectives.

Previous wording

Service costs decreased $60 million, or 2%, during the quarter ended June 30, 2024, compared to the same period in 2023. The decrease was primarily attributable to lower service costs of $85 million at RMS and $35 million at Space partially offset by higher service costs of $60 million at Aeronautics. Lower service costs at RMS were primarily due to an unfavorable profit adjustment on the Canadian Maritime Helicopter Program (CMHP) in the second quarter of 2023 that did not recur in the second quarter of 2024. Higher service costs at Aeronautics were due to higher volume as described above in “Service Sales”.

Current wording

Service costs during the nine months ended September 29, 2024 were comparable to the same period in 2023. Service costs at RMS in 2023 included an unfavorable profit adjustment on the Canadian Maritime Helicopter Program (CMHP) that did not recur in 2024, which was offset by higher volume at Space as described above in “Service Sales”.

Previous wording

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. Other unallocated, net reduced cost of sales by $197 million and $482 million during the quarter and six months ended June 30, 2024, compared to $277 million and $632 million during the quarter and six months ended June 25, 2023. 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 and six months ended June 30, 2024 compared to the same periods in 2023 and fluctuations in costs associated with various corporate items, none of which were individually significant.

Current wording

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. Other unallocated, net reduced cost of sales by $249 million and $731 million during the quarter and nine months ended September 29, 2024, compared to $251 million and $883 million during the quarter and nine months ended September 24, 2023. 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 nine months ended September 29, 2024 compared to the same periods in 2023 and fluctuations in costs associated with various corporate items, none of which were individually significant.

Previous wording

Interest expense was $261 million and $516 million and $223 million and $425 million during the quarters and six months ended June 30, 2024 and June 25, 2023. The increase in interest expense in 2024 resulted primarily from the issuance of senior unsecured notes in January 2024 and May 2023.

Current wording

Interest expense was $256 million and $772 million and $237 million and $662 million during the quarters and nine months ended September 29, 2024 and September 24, 2023. The increase in interest expense in 2024 resulted primarily from the issuance of senior unsecured notes in January 2024 and May 2023.

Previous wording

Non-service FAS pension income was $15 million and $31 million and $111 million and $221 million during the quarters and six months ended June 30, 2024 and June 25, 2023. 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.

Current wording

Non-service FAS pension income was $16 million and $47 million and $111 million and $332 million during the quarters and nine months ended September 29, 2024 and September 24, 2023. 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.

Previous wording

Other Non-operating Income (expense), Net

Current wording

Other non-operating income, net

Previous wording

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. Other non-operating income, net was $46 million and $91 million during the quarter and six months ended June 30, 2024, compared to other non-operating expense of $17 million and other non-operating income of $32 million during the quarter and six months ended June 25, 2023. See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.

Current wording

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. Other non-operating income, net was $18 million and $109 million and $37 million and $69 million during the quarters and nine months ended September 29, 2024 and September 24, 2023. See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.

Previous wording

Our effective income tax rates were 15.8% for both the quarter and six months ended June 30, 2024 and 16.2% and 15.8% for the quarter and six months ended June 25, 2023. 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.

Current wording

Our effective income tax rates were 15.4% and 15.6% for the quarter and nine months ended September 29, 2024 and 13.8% and 15.1% for the quarter and nine months ended September 24, 2023. The rate for the third quarter 2024 was higher than the rate for the third quarter 2023 primarily due to additional research and development tax credits that were claimed for years prior to 2023 reflected in the 2023 rate. 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.

Previous wording

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. While it is uncertain whether the U.S. 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. 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.

Current wording

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. While it is uncertain whether the United States 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. 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.

Previous wording

June 30, 2024 were affected by the factors mentioned above. Earnings per share also benefited from a net decrease of approximately 14.0 million weighted average common shares outstanding during both the quarter and six months ended June 30, 2024, compared to the same periods 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.

Current wording

We reported net earnings of $1.6 billion ($6.80 per share) and $4.8 billion ($20.05 per share) during the quarter and nine months ended September 29, 2024, compared to $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. Net earnings and earnings per share for the quarter and nine months ended September 29, 2024 were affected by the factors mentioned above. Earnings per share also benefited from a net decrease of approximately 11.6 million and 13.2 million weighted average common shares outstanding during the quarter and nine months ended September 29, 2024, compared to the same periods 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.

Previous wording

Our business segments’ results of operations include pension expense only as calculated under U.S. Government Cost Accounting Standards (CAS), which we refer to as CAS pension cost. We recover CAS pension and other postretirement benefit plan cost through the pricing of our products and services on U.S. Government contracts and, therefore, recognize CAS pension cost in each of our business segment’s net sales and cost of sales. Our consolidated financial statements must present pension and other postretirement benefit plan income calculated in accordance with Financial Accounting Standards (FAS) requirements under U.S. GAAP. The operating portion of the total FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension income (expense) and total CAS pension cost. The non-service FAS pension income components are included in non-service FAS pension income in our consolidated statements of earnings. 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.

Current wording

Our business segments’ results of operations include pension expense only as calculated under CAS, which we refer to as CAS pension cost. We recover CAS pension and other postretirement benefit plan cost through the pricing of our products and services on U.S. Government contracts and, therefore, recognize CAS pension cost in each of our business segments’ net sales and cost of sales. Our consolidated financial statements must present pension and other postretirement benefit plan income calculated in accordance with Financial Accounting Standards (FAS) requirements under U.S. GAAP. The operating portion of the total FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension income (expense) and total CAS pension cost. The non-service FAS pension income components are included in non-service FAS pension income in our consolidated statements of earnings. 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.

Previous wording

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. 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. 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. 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. 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. Favorable items include the positive resolution of contractual matters, cost recoveries on severance and restructuring, insurance recoveries and gains on sales of assets. Unfavorable items include the adverse resolution of contractual matters; supply chain disruptions; restructuring charges (except for significant severance actions, which are excluded from segment operating results); reserves for disputes; certain asset impairments; and losses on sales of certain assets. Our consolidated net profit booking rate adjustments increased segment operating profit by approximately $420 million and $615 million during the quarter and six months ended June 30, 2024 and $365 million and $780 million during the quarter and six months ended June 25, 2023. The impact to the six months ended June 30, 2024 segment operating profit includes a reach-forward loss of $100 million recognized in the first quarter of 2024 on a classified program at our MFC business segment. The impact to the quarter and six months ended June 25, 2023 included an unfavorable profit adjustment of $100 million on the Canadian Maritime Helicopter Program (CMHP) and a $65 million favorable profit adjustment as a result of a positive resolution of a contractual matter on an international surveillance and control program at our RMS business segment. See the discussions under “Contract Estimates” in Note 10 - Other included in our Notes to Consolidated Financial Statements (pages 23-24).

Current wording

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. 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. 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. 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. 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. Favorable items include the positive resolution of contractual matters, cost recoveries on severance and restructuring, insurance recoveries and gains on sales of assets. Unfavorable items include the adverse resolution of contractual matters; supply chain disruptions; restructuring charges (except for significant severance actions, which are excluded from segment operating results); reserves for disputes; certain asset impairments; and losses on sales of certain assets.

Previous wording

Aeronautics’ net sales during the quarter ended June 30, 2024 increased $402 million, or 6%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $335 million on the F-35 program due to higher volume on sustainment, development and production contracts; and $105 million on the F-16 program due to the ramp up on production.

Current wording

Aeronautics’ net sales during the quarter ended September 29, 2024 decreased $230 million, or 3%, compared to the same period in 2023. The decrease was primarily attributable to lower net sales of $480 million on the F-35 program due to lower volume on production contracts as a result of delays in receiving additional contractual authorization and funding under the Lots 18-19 contract. This decrease was partially offset by higher net sales of $120 million on the C-130 program primarily due to higher volume on production and sustainment contracts; and $85 million on the F-16 program due to the ramp up on production.

Previous wording

Aeronautics’ net sales during thesix months ended June 30, 2024 increased $978 million, or 7%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $640 million on the F-35 program due to higher volume on development, sustainment and production contracts; $165 million on the F-16 program due to the ramp up on production; and $150 million on classified programs driven by higher volume.

Current wording

Aeronautics’ net sales during thenine months ended September 29, 2024 increased $748 million, or 4%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $250 million on the F-16 program due to the ramp up on production; $185 million on classified programs driven by higher volume; and $160 million on the F-35 program due to higher volume on development and sustainment contracts. These increases were partially offset by lower volume on production contracts as a result of delays in receiving additional contractual authorization and funding under the Lots 18-19 contract.

Previous wording

Aeronautics’ operating profit during the quarter ended June 30, 2024 increased $33 million, or 5%, comparedto the same period in 2023. The increase in operating profit was attributable to $35 million from higher volume and program ramp up described above and $25 million from favorable contract mix across the portfolio, partially offset by $25 million of lower profit booking rate adjustments. The decrease in profit booking rate adjustments was due to a $45 million unfavorable profit adjustment on a classified program because of higher than anticipated costs to maintain program objectives, partially offset by higher net favorable profit adjustments across the portfolio.

Current wording

Aeronautics’ operating profit during thenine months ended September 29, 2024 increased$25 million, or 1%, compared to the same period in 2023. The increase in operating profit was attributable to $70 million from higher volume and program ramp up described above, partially offset by $35 million of lower profit booking rate adjustments. The decrease in profit booking rate adjustments was due to $145 million of unfavorable profit rate adjustments on a classified program because of higher than anticipated costs to achieve program objectives, partially offset by an $85 million favorable profit rate adjustment for a claim associated with a C-5 Galaxy contract as described above.

Previous wording

MFC’s net sales during the quarter ended June 30, 2024 increased $347 million, or 13%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $320 million for tactical and strike missile programs due to production ramp up on Guided Multiple Launch Rocket Systems (GMLRS) and Long Range Anti-Ship Missile (LRASM) programs.

Current wording

MFC’s net sales during the quarter ended September 29, 2024 increased $236 million, or 8%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $285 million for tactical and strike missile programs due to production ramp up on Guided Multiple Launch Rocket Systems (GMLRS) and Long Range Anti-Ship Missile (LRASM) programs. This increase was partially offset by lower net sales of $90 million for integrated air and missile defense programs due to lower volume on Patriot Advanced Capability-3 (PAC-3) and Terminal High Altitude Area Defense (THAAD).

Previous wording

Space’s operating profit during the quarter ended June 30, 2024 increased $34 million, or 11%, compared to the same period in 2023. The increase in operating profit was attributable to $20 million from favorable contract mix across the portfolio and $20 million of higher profit booking rate adjustments. The increase in profit booking rate adjustments was due to higher favorable profit adjustments on the FBM program.

Current wording

MFC’s operating profit during the quarter ended September 29, 2024 increased $58 million, or 15%, compared to the same period in 2023. The increase in operating profit was attributable to $35 million of higher profit booking rate adjustments and $20 million from volume described above. The increase in profit booking rate adjustments was primarily due to higher favorable profit rate adjustments on PAC-3 as a result of better than anticipated cost performance.

Previous wording

MFC’s net sales during thesix months ended June 30, 2024 increased $952 million, or 19%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $780 million for tactical and strike missile programs due to production ramp up on GMLRS, LRASM and Javelin programs.

Current wording

MFC’s net sales during thenine months ended September 29, 2024 increased $1.2 billion, or 15%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $1.1 billion for tactical and strike missile programs due to production ramp up on GMLRS, LRASM and Javelin programs.

Previous wording

MFC’s operating profit during the six months ended June 30, 2024 increased $13 million, or 2%, compared to the same period in 2023. The increase in operating profit was attributable to $110 million from the production ramp up described above, partially offset by $40 million of lower profit booking rate adjustments and $55 million from contract mix. The decrease in profit booking rate adjustments was due toa $100 million reach-forward loss recognized in the first quarter of 2024 for an option on a classified program, partially offset byhigher favorable profit booking rate adjustments on PAC-3 and Apache as described above.

Current wording

MFC’s operating profit during the nine months ended September 29, 2024 increased $71 million, or 6%, compared to the same period in 2023. The increase in operating profit was attributable to $130 million from the production ramp up described above, partially offset by $55 million related to unfavorable contract mix. Profit booking rate adjustments were comparable asa $100 million reach-forward loss recognized in the first quarter of 2024 for an option on a classified program was offset byhigher favorable profit rate adjustments, primarily on PAC-3 and multiple sensors and global sustainment programs due to better than anticipated cost performance.

Previous wording

RMS’ net sales during the quarter ended June 30, 2024 increased $651 million, or 17%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $420 million on integrated warfare systems and sensors (IWSS) programs due to higher volume on radar programs and the Canadian Surface Combatant (CSC) program, and new program ramp up within the laser systems portfolio; and $160 million for Sikorsky helicopter programs due to higher production volume on Black Hawk and CH-53K programs.

Current wording

RMS’ net sales during the quarter ended September 29, 2024 increased $246 million, or 6%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $185 million on integrated warfare systems and sensors (IWSS) programs due to higher volume on radar programs and the Canadian Surface Combatant (CSC) program; and $50 million for Sikorsky helicopter programs due to higher production volume on CH-53K, Seahawk and Black Hawk programs.

Previous wording

RMS’ net sales during thesix months ended June 30, 2024 increased$1.2 billion, or 17%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $715 million on IWSS programs due to higher volume on radar programs and the CSC program, and new program ramp up within the laser systems portfolio; $260 million for Sikorsky helicopter programs due to higher production volume on CH-53K, Black Hawk and Seahawk programs; and $235 million for various C6ISR programs due to higher volume.

Current wording

RMS’ net sales during the nine months ended September 29, 2024 increased $1.5 billion, or 13%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $900 million on IWSS programs due to higher volume on radar programs and the CSC program, and new program ramp up within the laser systems portfolio; $310 million for Sikorsky helicopter programs due to higher production volume on CH-53K, Black Hawk and Seahawk programs; and $250 million for various C6ISR programs due to higher volume.

Previous wording

RMS’ operating profit during the quarter ended June 30, 2024 increased $41 million, or 9%, compared to the same period in 2023. The increase in operating profit was attributable to $70 million from higher volume described above, partially offset by $20 million of lower profit booking rate adjustments. The decrease in profit booking rate adjustments was due to unfavorable profit adjustments on Seahawk and Black Hawk production programs as a result of increased costs, partially offset by the net impact in the second quarter of 2023 of both a $65 million favorable profit adjustment on an international surveillance and control program and a $100 million unfavorable profit adjustment on the Canadian Maritime Helicopter Program (CMHP) that did not recur in the second quarter of 2024.

Current wording

RMS’ operating profit during the nine months ended September 29, 2024 increased $122 million, or 9%, compared to the same period in 2023. The increase in operating profit was attributable to $145 million from higher volume and program ramp up described above and $10 million from favorable contract mix, partially offset by $75 million of lower profit booking rate adjustments. The decrease in profit booking rate adjustments was due to unfavorable profit rate adjustments on Seahawk and Black Hawk production programs, partially offset by the net impact in 2023 of both a $100 million unfavorable profit rate adjustment on CMHP and a $65 million favorable profit rate adjustment on an international surveillance and control program that did not recur in 2024.

Previous wording

Space’s net sales during the quarter ended June 30, 2024 increased $29 million, or 1%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $110 million for strategic and missile defense programs due to higher volume on the hypersonics and Fleet Ballistic Missile (FBM) programs; partially offset by lower net sales of $50 million for national security space due to lower volume on classified programs and $45 million for commercial civil space due to lower volume on the Orion program.

Current wording

Space’s net sales during the quarter ended September 29, 2024 decreased $26 million, or 1%, compared to the same period in 2023. The decrease was primarily attributable to lower net sales of $50 million for commercial civil space due to lower volume on the Orion program, partially offset by higher volume on other space exploration programs. This decrease was partially offset by higher net sales of $25 million for strategic and missile defense programs due to higher volume on reentry programs.

Previous wording

Space’s operating profit during the six months ended June 30, 2024 increased $79 million, or 13%, compared to the same period in 2023. The increase was primarily attributable to $45 million from favorable contract mix across the portfolio, $25 million from higher volume described above and $25 million of higher equity earnings driven by higher launch volume from our investment in United Launch Alliance (ULA), partially offset by $10 million of lower profit booking rate adjustments. The decrease in profit booking rate adjustments reflects lower net favorable profit adjustments on the Orion program.

Current wording

Space’s operating profit during the quarter ended September 29, 2024 increased $13 million, or 5%, compared to the same period in 2023. The increase in operating profit was attributable to $25 million related to favorable contract mix across the portfolio, partially offset by $10 million of lower equity earnings driven by lower launch volume from our investment in United Launch Alliance (ULA). Profit booking rate adjustments were comparable.

Previous wording

Space’s net sales during thesix months ended June 30, 2024 increased$339 million, or 6%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $245 million for strategic and missile defense programs due to higher volume on the hypersonics and FBM programs; and higher net sales of $65 million for national security space programs due to higher volume on GPS III and Transport Layer programs and ramp up on the Tracking Layer, partially offset by lower volume on classified programs. Net sales for commercial civil space were comparable as lower volume and the impact of lower favorable profit adjustments on the Orion program was offset by higher volume on other space exploration programs.

Current wording

Space’s net sales during thenine months ended September 29, 2024 increased$313 million, or 3%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $270 million for strategic and missile defense programs due to higher volume on the hypersonics and FBM programs; and higher net sales of $35 million for national security space programs due to higher volume on Transport Layer programs and ramp up on the Tracking Layer program, partially offset by lower volume on classified programs. These increases were partially offset by lower net sales of $70 million for commercial civil space due to lower volume and the impact of lower favorable profit adjustments on the Orion program, partially offset by higher volume on other space exploration programs.

Previous wording

Total equity earnings/(losses) (primarily ULA) represented approximately $10 million, or 3%, and $25 million, or 4%, of Space's operating profit during the quarter and six months ended June 30, 2024, compared to approximately $20 million, or 6%, and $5 million, or 1% for the same periods in 2023.

Current wording

Total equity earnings (ULA) represented approximately $5 million, or 2%, and $30 million, or 3%, of Space's operating profit during the quarter and nine months ended September 29, 2024, compared to approximately $15 million, or 6%, and $20 million, or 2% for the same periods in 2023.

Previous wording

At June 30, 2024, we had cash and cash equivalents of $2.5 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. However, we also have access to credit markets, if needed, for liquidity or general corporate purposes. This access includes our $3.0 billion revolving credit facility or the ability to issue commercial paper. There were no borrowings outstanding under the revolving credit facility and commercial paper at both June 30, 2024 and December 31, 2023. As of June 30, 2024, we were in compliance with all covenants contained in our debt and credit agreements.

Current wording

At September 29, 2024, we had cash and cash equivalents of $3.2 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. However, we also have access to credit markets, if needed, for liquidity or general corporate purposes. This access includes our $3.0 billion revolving credit facility or the ability to issue commercial paper (see “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information). There were no borrowings outstanding under the revolving credit facility and commercial paper at both September 29, 2024 and December 31, 2023.

Previous wording

Billing timetables and payment terms on our contracts vary based on a number of factors, including the contract type. 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 June 30, 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. The amount of performance-based payments and the related milestones are 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.

Current wording

41% of the sales we recorded during the nine months ended September 29, 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. The amount of performance-based payments and the related milestones are 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.

Previous wording

We continue to return cash to stockholders through dividends and share repurchases. As of June 30, 2024, the total remaining authorization for future common share repurchases under our program was $8.2 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. The amount of shares ultimately purchased and the timing of purchases are at the discretion of management and subject to compliance with applicable law and regulation.

Current wording

We continue to return cash to stockholders through dividends and share repurchases. In October 2024, the Board of Directors authorized a fourth quarter dividend payment of $3.30 per share, representing an increase of $0.15 per share over the prior quarterly dividend payment. The Board of Directors also authorized an increase of $3.0 billion to our share repurchase program in addition to the $7.3 billion remaining authorization under our program as of September 29, 2024. The stock repurchase program does not have an expiration date and may be amended or terminated by the Board of Directors at any time. The amount of shares ultimately purchased and the timing of purchases are at the discretion of management and subject to compliance with applicable law and regulation.

Previous wording

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. Future pension risk transfer transactions could be significant and result in us making additional contributions to the pension trust. 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). 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. We may also make additional contributions at our discretion.

Current wording

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. Future pension risk transfer transactions could be significant and result in us making additional contributions to the pension trust. 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 CAS. 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. We may also make additional contributions at our discretion.