INFORMATION ON BUSINESS SEGMENTS

9 Months Ended

Sep. 25, 2022

Segment Reporting [Abstract]

INFORMATION ON BUSINESS SEGMENTS

INFORMATION ON BUSINESS SEGMENTS

Overview

We operate in four business segments: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. We organize our business segments based on the nature of products and services offered.

Selected Financial Data by Business Segment

Net sales and operating profit of our business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation and not included in management’s evaluation of performance of each segment. Business segment operating profit includes our share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of our business segments.

Summary Operating Results

Summary operating results for each of our business segments were as follows (in millions):

	Quarters Ended				Nine Months Ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
Net sales
Aeronautics	$	7,089	$	6,568	$	19,352	$	19,621
Missiles and Fire Control	2,831		2,781		8,030		8,474
Rotary and Mission Systems	3,781		3,980		11,345		12,329
Space	2,882		2,699		8,266		8,891
Total net sales	$	16,583	$	16,028	$	46,993	$	49,315
Operating profit
Aeronautics	$	759	$	714	$	2,050	$	1,979
Missiles and Fire Control	382		413		1,184		1,210
Rotary and Mission Systems	414		459		1,165		1,350
Space	301		264		814		826
Total business segment operating profit	1,856		1,850		5,213		5,365
Unallocated items
FAS/CAS pension operating adjustment	430		491		1,281		1,469
Severance and restructuring charges	—		—		—		(36)
Other, net	(127)		(47)		(439)		(130)
Total unallocated items	303		444		842		1,303
Total consolidated operating profit	$	2,159	$	2,294	$	6,055	$	6,668
Intersegment sales
Aeronautics	$	63	$	60	$	181	$	165
Missiles and Fire Control	146		153		463		449
Rotary and Mission Systems	503		455		1,411		1,381
Space	102		95		284		269
Total intersegment sales	$	814	$	763	$	2,339	$	2,264
Amortization of purchased intangibles
Aeronautics	$	—	$	—	$	(1)	$	(1)
Missiles and Fire Control	(1)		(1)		(2)		(2)
Rotary and Mission Systems	(58)		(58)		(174)		(174)
Space	(3)		(2)		(9)		(46)
Total amortization of purchased intangibles	$	(62)	$	(61)	$	(186)	$	(223)

Unallocated Items

Business segment operating profit excludes the FAS/CAS pension operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, changes in the fair value of strategic investments in companies made by our Lockheed Martin Ventures Fund, stock-based compensation expense, changes in the fair value of investments held in a trust for deferred compensation plans, retiree benefits, significant severance actions, significant asset impairments, gains or losses from divestitures, and other miscellaneous corporate activities. Excluded items are included in the reconciling item “Unallocated items” between operating profit from our business segments and our consolidated operating profit. See “Note 10 - Other” for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments.

FAS/CAS Pension Operating Adjustment

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 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 (expense) components are included in non-service FAS pension income (expense) 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.

The total FAS/CAS pension adjustment for the quarters and nine months ended September 25, 2022 and September 26, 2021, 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):

	Quarters Ended				Nine Months Ended
	September 25, 2022		September 26, 2021		September 25, 2022			September 26, 2021
Total FAS income (expense) and CAS cost
FAS pension income (expense)	$	91	$	(1,598)		$	(1,148)	$	(1,465)
Less: CAS pension cost	450		517			1,349		1,549
Total FAS/CAS pension adjustment	$	541	$	(1,081)		$	201	$	84
Service and non-service cost reconciliation
FAS pension service cost	$	(20)	$	(26)		$	(68)	$	(80)
Less: CAS pension cost	450		517			1,349		1,549
Total FAS/CAS pension operating adjustment	430		491			1,281		1,469
Non-service FAS pension income (expense)	111		(1,572)			(1,080)		(1,385)
Total FAS/CAS pension adjustment	$	541	$	(1,081)		$	201	$	84

The total FAS/CAS pension adjustment for the nine months ended September 25, 2022 reflects a noncash, non-operating pension settlement charge of $1.5 billion ($1.2 billion, or $4.33 per share, after-tax) recognized in the second quarter in connection with the transfer of $4.3 billion of our gross defined benefit pension obligations and related plan assets to an insurance company on June 24, 2022. The total FAS/CAS pension adjustment during the quarter and nine months ended September 26, 2021 reflects a noncash, non-operating pension settlement charge of $1.7 billion ($1.3 billion, or $4.72 per share, after-tax) recognized in connection with the transfer of $4.9 billion of our gross defined benefit pension obligations and related plan assets to an insurance company on August 3, 2021. See “Note 6 - Postretirement Benefit Plans.

Disaggregation of Net Sales

Net sales by products and services, contract type, customer, and geographic region were as follows (in millions):

	Quarter Ended September 25, 2022
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	6,072	$	2,530	$	2,968	$	2,441	$	14,011
Services	1,017		301		813		441		2,572
Total net sales	$	7,089	$	2,831	$	3,781	$	2,882	$	16,583
Net sales by contract type
Fixed-price	$	5,217	$	2,005	$	2,436	$	722	$	10,380
Cost-reimbursable	1,872		826		1,345		2,160		6,203
Total net sales	$	7,089	$	2,831	$	3,781	$	2,882	$	16,583
Net sales by customer
U.S. Government	$	4,728	$	2,086	$	2,721	$	2,842	$	12,377
International (a)	2,326		744		1,002		34		4,106
U.S. commercial and other	35		1		58		6		100
Total net sales	$	7,089	$	2,831	$	3,781	$	2,882	$	16,583
Net sales by geographic region
United States	$	4,763	$	2,087	$	2,779	$	2,848	$	12,477
Europe	1,184		228		199		21		1,632
Asia Pacific	785		100		440		10		1,335
Middle East	255		374		181		3		813
Other	102		42		182		—		326
Total net sales	$	7,089	$	2,831	$	3,781	$	2,882	$	16,583

	Nine Months Ended September 25, 2022
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	16,293	$	7,147	$	8,906	$	6,920	$	39,266
Services	3,059		883		2,439		1,346		7,727
Total net sales	$	19,352	$	8,030	$	11,345	$	8,266	$	46,993
Net sales by contract type
Fixed-price	$	13,819	$	5,661	$	7,243	$	2,112	$	28,835
Cost-reimbursable	5,533		2,369		4,102		6,154		18,158
Total net sales	$	19,352	$	8,030	$	11,345	$	8,266	$	46,993
Net sales by customer
U.S. Government	$	12,904	$	5,605	$	8,017	$	8,144	$	34,670
International (a)	6,344		2,419		3,102		97		11,962
U.S. commercial and other	104		6		226		25		361
Total net sales	$	19,352	$	8,030	$	11,345	$	8,266	$	46,993
Net sales by geographic region
United States	$	13,008	$	5,611	$	8,243	$	8,169	$	35,031
Europe	3,052		746		564		65		4,427
Asia Pacific	2,211		313		1,425		23		3,972
Middle East	739		1,256		558		9		2,562
Other	342		104		555		—		1,001
Total net sales	$	19,352	$	8,030	$	11,345	$	8,266	$	46,993

	Quarter Ended September 26, 2021
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	5,573	$	2,429	$	3,201	$	2,272	$	13,475
Services	995		352		779		427		2,553
Total net sales	$	6,568	$	2,781	$	3,980	$	2,699	$	16,028
Net sales by contract type
Fixed-price	$	4,819	$	1,900	$	2,617	$	631	$	9,967
Cost-reimbursable	1,749		881		1,363		2,068		6,061
Total net sales	$	6,568	$	2,781	$	3,980	$	2,699	$	16,028
Net sales by customer
U.S. Government	$	4,312	$	1,938	$	2,838	$	2,671	$	11,759
International (a)	2,229		847		1,047		22		4,145
U.S. commercial and other	27		(4)		95		6		124
Total net sales	$	6,568	$	2,781	$	3,980	$	2,699	$	16,028
Net sales by geographic region
United States	$	4,339	$	1,934	$	2,933	$	2,677	$	11,883
Europe	910		226		213		32		1,381
Asia Pacific	890		81		409		(14)		1,366
Middle East	360		527		246		4		1,137
Other	69		13		179		—		261
Total net sales	$	6,568	$	2,781	$	3,980	$	2,699	$	16,028

	Nine Months Ended September 26, 2021
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	16,635	$	7,410	$	9,870	$	7,571	$	41,486
Services	2,986		1,064		2,459		1,320		7,829
Total net sales	$	19,621	$	8,474	$	12,329	$	8,891	$	49,315
Net sales by contract type
Fixed-price	$	14,473	$	5,769	$	8,096	$	1,890	$	30,228
Cost-reimbursable	5,148		2,705		4,233		7,001		19,087
Total net sales	$	19,621	$	8,474	$	12,329	$	8,891	$	49,315
Net sales by customer
U.S. Government	$	12,952	$	6,155	$	8,711	$	7,941	$	35,759
International (a)	6,611		2,316		3,384		926		13,237
U.S. commercial and other	58		3		234		24		319
Total net sales	$	19,621	$	8,474	$	12,329	$	8,891	$	49,315
Net sales by geographic region
United States	$	13,010	$	6,158	$	8,945	$	7,965	$	36,078
Europe	2,708		640		637		931		4,916
Asia Pacific	2,697		188		1,593		(10)		4,468
Middle East	955		1,452		593		5		3,005
Other	251		36		561		—		848
Total net sales	$	19,621	$	8,474	$	12,329	$	8,891	$	49,315

(a)International sales include foreign military sales (FMS) contracted through the U.S. Government and direct commercial sales to international governments and other international customers.

Our Aeronautics business segment includes our largest program, the F-35 Lightning II Joint Strike Fighter, an international multi-role, multi-variant, stealth fighter aircraft. Net sales for the F-35 program represented approximately 29% and 27% of our total consolidated net sales for the quarter and nine months ended September 25, 2022 and 28% and 27% of our total consolidated net sales for the quarter and nine months ended September 26, 2021.

Assets

Total assets for each of our business segments were as follows (in millions):

	September 25, 2022		December 31, 2021
Assets
Aeronautics	$	12,080	$	10,756
Missiles and Fire Control	5,560		5,243
Rotary and Mission Systems	17,792		17,664
Space	6,517		6,199
Total business segment assets	41,949		39,862
Corporate assets (a)	10,081		11,011
Total assets	$	52,030	$	50,873

(a)Corporate assets primarily include cash and cash equivalents, deferred income taxes, assets for the portion of environmental costs that are probable of future recovery, property, plant and equipment, investments held in a separate trust for deferred compensation plans and investments held in the Lockheed Martin Ventures Fund.