Lockheed Martin Reports Fourth Quarter and Full Year 2023 Financial Results

Lockheed Martin Corporation [NYSE: LMT] today reported fourth quarter 2023 net sales of $18.9 billion, compared to $19.0 billion in the fourth quarter of 2022. Net earnings in the fourth quarter of 2023 and 2022 were $1.9 billion, or $7.58 and $7.40 per share, respectively. Cash from operations was $2.4 billion in the fourth quarter of 2023, compared to $1.9 billion in the fourth quarter of 2022. Free cash flow was $1.7 billion in the fourth quarter of 2023, compared to $1.2 billion in the fourth quarter of 2022.

Net sales in 2023 were $67.6 billion, compared to $66.0 billion in 2022. Net earnings in 2023 were $6.9 billion, or $27.55 per share, compared to $5.7 billion, or $21.66 per share, in 2022. Cash from operations in 2023 was $7.9 billion, compared to $7.8 billion in 2022. Free cash flow in 2023 was $6.2 billion, compared to $6.1 billion in 2022.

“Our solid finish to 2023 and full-year results reflect continued strong demand for our all-domain portfolio of advanced defense tech solutions. Backlog reached a record $160.6 billion billion and sales increased 2 percent year-over-year to $67.6 billion,” said Lockheed Martin Chairman, President and CEO Jim Taiclet. “In 2023 we invested $1.5 billion in research and development and an additional $1.7 billion of capital expenditures to create, accelerate and refine the development of innovative 21st Century Security capabilities. In line with our expectations, we generated $6.2 billion of free cash flow for the year, supporting strong free cash flow per share growth, and we returned over $9 billion to shareholders through dividends and share repurchases.

“Looking ahead to 2024 and beyond, our opportunities to support global security for the U.S. Government and its allies remain robust with traditional and breakthrough technologies. Our team will continue to realize the vision for 21st Century Security integrated platforms and systems, working with industry and commercial partners to pioneer and mature deterrence solutions for customers worldwide. Inside the company, our 1LMX digital transformation initiative will further materialize and drive speed, resiliency, efficiency and competitiveness across our operations. As a result, we anticipate continued top-line growth in 2024 and sustained cash flow conversion and deployment, in support of our mid-single digit growth target in free cash flow per share.”

Adjusted earnings before income taxes, net earnings and diluted EPS

The table below shows the impact to earnings before income taxes, net earnings and diluted earnings per share (EPS) for certain non-operational items:

(in millions, except per share data)

Quarters Ended

Dec. 31,

2023

Dec. 31,

2022

Earnings
Before Income
Taxes

Net
Earnings

Diluted
EPS

Earnings
Before Income
Taxes

Net
Earnings

Diluted
EPS

As Reported (GAAP)

$     2,145

$     1,866

$       7.58

$     2,190

$     1,912

$       7.40

Severance and other charges

92

73

0.30

100

79

0.31

Mark-to-market investment losses1

6

5

0.02

29

22

0.08

Total Adjustments

98

78

0.32

129

101

0.39

As Adjusted (Non-GAAP)2

$     2,243

$     1,944

$       7.90

$     2,319

$     2,013

$       7.79

1

Includes changes in valuations of the company’s net assets and liabilities for deferred compensation plans and early-stage company investments.

2

See the “Use of Non-GAAP Financial Measures” section of this news release for more information.

(in millions, except per share data)

Years Ended

Dec. 31,

2023

Dec. 31,

2022

Earnings
Before Income
Taxes

Net
Earnings

Diluted
EPS

Earnings
Before Income
Taxes

Net
Earnings

Diluted
EPS

As Reported (GAAP)

$     8,098

$     6,920

$     27.55

$     6,680

$     5,732

$     21.66

Pension settlement charge

1,470

1,156

4.33

Severance and other charges

92

73

0.30

100

79

0.31

Mark-to-market investment (gains) losses1

(10)

(8)

(0.03)

290

219

0.83

Debt refinancing transaction

34

26

0.10

Total Adjustments

82

65

0.27

1,894

1,480

5.57

As Adjusted (Non-GAAP)2

$     8,180

$     6,985

$     27.82

$     8,574

$     7,212

$     27.23

1

Includes changes in valuations of the company’s net assets and liabilities for deferred compensation plans and early-stage company investments.

2

See the “Use of Non-GAAP Financial Measures” section of this news release for more information.

Severance and other charges

During the fourth quarter of 2023, the company recorded charges totaling $92 million ($73 million, or $0.30 per share, after-tax) which include severance costs for the planned reduction of certain positions across the company and asset impairment charges. This action resulted from a review of the company’s business segments and corporate functions and is intended to improve the efficiency of the company’s operations.

Summary Financial Results

The following table presents the company’s summary financial results.

(in millions, except per share data)

Quarters Ended Dec. 31,

Years Ended Dec. 31,

2023

2022

2023

2022

Net sales

$           18,874

$           18,991

$           67,571

$          65,984

Business segment operating profit1,2

$             2,042

$             2,068

$             7,389

$            7,467

Unallocated items

FAS/CAS operating adjustment

415

428

1,660

1,709

Severance and other charges3

(92)

(100)

(92)

(100)

Intangible asset amortization expense2

(62)

(62)

(247)

(248)

Other, net4

(10)

(41)

(203)

(480)

Total unallocated items

251

225

1,118

881

Consolidated operating profit

$             2,293

$             2,293

$             8,507

$            8,348

Net earnings4,5,6

$             1,866

$             1,912

$             6,920

$            5,732

Diluted earnings per share4,5,6

$               7.58

$               7.40

$             27.55

$            21.66

Cash from operations7

$             2,365

$             1,928

$             7,920

$            7,802

Capital expenditures

(704)

(693)

(1,691)

(1,670)

Free cash flow1,7

$             1,661

$             1,235

$             6,229

$            6,132

1

Business segment operating profit and free cash flow are non-GAAP measures. See the “Use of Non-GAAP Financial Measures” section

of this news release for more information.

2

Effective Jan. 1, 2023, the company 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. The 2022 amounts reflect the impact of this change.

3

Severance and other charges for the quarter and year ended Dec. 31, 2023 include $92 million ($73 million, or $0.30, after-tax) severance
costs associated with the planned elimination of certain positions through involuntary actions across the company and asset impairment
charges. Severance and other charges for the quarter and year ended Dec. 31, 2022 included $100 million ($79 million, or $0.31 per
share, after-tax) related to certain actions at the company’s RMS business segment, which included severance costs for the planned reduction
of certain positions and asset impairment charges.

4

Other, net for the quarter and year ended Dec. 31, 2023 included net gains of $34 million ($26 million, or $0.10 per share, after-tax) and $74 million
($56 million, or $0.22 per share, after-tax), compared to net gains of $19 million ($14 million, or $0.06 per share, after-tax) and net losses of
$176 million ($132 million, or $0.50 per share, after-tax) for the quarter and year ended Dec. 31, 2022 due to changes in the fair value of net assets
and liabilities for deferred compensation plans.

5

Net earnings for the quarter and year ended Dec. 31, 2023 included net losses of $40 million ($30 million, or $0.12 per share, after-tax) and $64 million
($48 million, or $0.19 per share, after-tax), compared to net losses of $48 million ($36 million, or 0.14 per share, after-tax) and $114 million ($86 million, or
$0.33 per share, after-tax) for the quarter and year ended Dec. 31, 2022 due to changes in the fair value of early-stage company investments.

6

Net earnings for the quarters and years ended Dec. 31, 2023 and 2022 include certain non-operational charges. See prior table for further

details.

7

See the “Cash Flows and Capital Deployment Activities” section of this news release for more information.

2024 Financial Outlook

The following table and other sections of this news release contain forward-looking statements, which are based on the company’s current expectations. Actual results may differ materially from those projected. It is the company’s practice not to incorporate adjustments into its financial outlook for proposed or potential acquisitions, divestitures, ventures, pension risk transfer transactions, financing transactions, changes in law, or new accounting standards until such items have been consummated, enacted or adopted. For additional factors that may impact the company’s actual results, refer to the “Forward-Looking Statements” section in this news release.

(in millions, except per share data)

2024 Outlook1

Net sales

$68,500 – $70,000

Business segment operating profit2

$7,175- $7,375

Total FAS/CAS pension adjustment3

~$1,685

Diluted earnings per share4

$25.65 – $26.35

Cash from operations

$7,750 – $8,050

Capital expenditures

~$1,750

Free cash flow2

$6,000 – $6,300

1

The company’s current 2024 financial outlook does not include any future gains or losses related to changes in valuations of the company’s
net assets and liabilities for deferred compensation plans or early-stage company investments. The company’s financial outlook for 2024 assumes
that fiscal year 2024 appropriations bills are adopted in a timely manner, the company’s programs remain funded and that the U.S. Government
does not shutdown or continue to operate under a continuing resolution for the remainder of 2024. In addition, the outlook includes known impacts
from inflationary pressures and labor and supply chain challenges at the time of this news release and experienced to date.

2

Business segment operating profit and free cash flow are non-GAAP measures. See the “Use of Non-GAAP Financial Measures” section of this
news release for more information.

3

The total FAS/CAS pension adjustment is presented as a single amount and includes total expected U.S. Government cost accounting standards
(CAS) pension cost of approximately $1.7 billion. Total expected financial accounting standards (FAS) pension income is not significant. For additional
detail regarding the pension amounts reported in operating and non-operating results, refer to the supplemental table included at the end
of this news release.

4

Although the company typically does not update its outlook for proposed changes in law, the above includes the effect of Notice 2023-63 confirming
that certain expenditures incurred in the performance of cost-type contracts are not subject to capitalization. The company believes incorporating the
clarification from the Notice more accurately reflects its expectations because the Notice describes the tax treatment of certain expenditures inaccordance
with the company’s analysis of the Internal Revenue Code.

Cash Flows and Capital Deployment Activities

Cash from operations in the fourth quarter of 2023 was $2.4 billion and capital expenditures were $704 million, resulting in free cash flow of $1.7 billion. The increase in operating and free cash flow in the fourth quarter compared to the same period in 2022 was primarily due to the timing of international advances on the PAC-3 program and production and billing cycles impacting contract liabilities, contract assets and receivables (primarily RMS), partially offset by timing of cash payments for accounts payable across the company.

Cash from operations in 2023 was $7.9 billion and capital expenditures were $1.7 billion, resulting in free cash flow of $6.2 billion. The increase in operating and free cash flow in 2023 compared to 2022 was primarily due to the timing of production and billing cycles impacting receivables (primarily the F-35 program at Aeronautics) and contract assets (primarily IWSS programs at RMS), partially offset by timing of cash payments for accounts payable across the company.

The company’s cash activities in the quarter and year ended Dec. 31, 2023, included the following:

  • paying cash dividends of $767 million and $3.1 billion during the quarter and year ended Dec. 31, 2023;
  • paying $3.0 billion to repurchase 6.7 million shares and $6.0 billion to repurchase 13.4 million shares during the quarter and year ended Dec. 31, 2023;
  • receiving net proceeds of $2.0 billion from a debt issuance during the year ended Dec. 31, 2023; and
  • making a scheduled repayment of $115 million of long-term debt during the year ended Dec. 31, 2023.

Segment Results

The company operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. The following table presents summary operating results of the company’s business segments and reconciles these amounts to the company’s consolidated financial results.

(in millions)

Quarters Ended Dec. 31,

Years Ended Dec. 31,

2023

2022

2023

2022

Net sales

Aeronautics

$            7,613

$            7,635

$          27,474

$          26,987

Missiles and Fire Control

3,171

3,287

11,253

11,317

Rotary and Mission Systems

4,711

4,803

16,239

16,148

Space

3,379

3,266

12,605

11,532

Total net sales

$          18,874

$          18,991

$          67,571

$          65,984

Operating profit

Aeronautics

$              761

$              816

$            2,825

$            2,867

Missiles and Fire Control

395

451

1,541

1,637

Rotary and Mission Systems

579

567

1,865

1,906

Space

307

234

1,158

1,057

Total business segment operating 

   profit1

2,042

2,068

7,389

7,467

Unallocated items

FAS/CAS operating adjustment

415

428

1,660

1,709

Severance and other charges

(92)

(100)

(92)

(100)

Intangible asset amortization

   expense1

(62)

(62)

(247)

(248)

Other, net

(10)

(41)

(203)

(480)

Total unallocated items

251

225

1,118

881

Total consolidated operating profit

$            2,293

$            2,293

$            8,507

$            8,348

1

Effective Jan. 1, 2023, the company 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. The 2022 amounts reflect the
impact of this change.

Net sales and operating profit of the company’s 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 the company’s 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 the company’s business segments.

Business segment operating profit excludes the FAS/CAS pension operating adjustment, 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, stock-based compensation expense, retiree benefits, significant severance actions, significant asset impairments, gains or losses from divestitures, intangible asset amortization expense, and other miscellaneous corporate activities. Excluded items are included in the reconciling item “Unallocated items” between operating profit from the company’s business segments and its consolidated operating profit.

Changes in net sales and operating profit generally are expressed in terms of volume. 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. In addition, comparability of the company’s segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on the company’s contracts. Increases in 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. 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. 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.

The company’s consolidated net favorable profit booking rate adjustments represented approximately 23% and 21% of total segment operating profit in the quarter and year ended December 31, 2023 and 24% in both the quarter and year ended December 31, 2022.

Aeronautics 

(in millions)

Quarters Ended Dec. 31,

Years Ended Dec. 31,

2023

2022

2023

2022

Net sales

$     7,613

$     7,635

$     27,474

$     26,987

Operating profit

761

816

2,825

2,867

Operating margin

10.0 %

10.7 %

10.3 %

10.6 %

Aeronautics’ net sales in the fourth quarter of 2023 were comparable to the same period in 2022. Net sales on the F-35 program decreased $275 million due to lower volume on production contracts partially offset by higher volume on development and sustainment contracts. Net sales increased on classified programs by $180 million driven by higher volume and increased on the F-16 program by $65 million due to the ramp up on production.

Aeronautics’ operating profit in the fourth quarter of 2023 decreased $55 million, or 7%, compared to the same period in 2022. The decrease was primarily attributable to lower operating profit of $50 million on the F-35 program due to the lower cost throughput described above and lower net favorable profit adjustments on production contracts. Total net profit booking rate adjustments were $85 million lower in the fourth quarter of 2023 compared to the same period in 2022.

Aeronautics’ net sales in 2023 increased $487 million, or 2%, compared to 2022. Net sales increased by approximately $540 million for the ramp up on classified programs and $230 million on the F-16 program related to the ramp up in production. These increases were partially offset by lower net sales of $400 million on the F-35 program due to lower volume on production contracts partially offset by higher volume on sustainment and development contracts.

Aeronautics’ operating profit in 2023 decreased $42 million, or 1%, compared to 2022. The decrease was primarily attributable to lower operating profit of $100 million on the F-22 program due to lower net favorable profit adjustments and $95 million on the F-35 program due to lower net favorable profit adjustments on production contracts. These decreases were partially offset by higher operating profit of $115 million on classified programs due to higher net favorable profit adjustments and the impact of the higher sales as discussed above. Total net profit booking rate adjustments were $180 million lower in 2023 compared to 2022.

Missiles and Fire Control

(in millions)

Quarters Ended Dec. 31,

Years Ended Dec. 31,

2023

2022

2023

2022

Net sales

$         3,171

$         3,287

$      11,253

$      11,317

Operating profit

395

451

1,541

1,637

Operating margin

12.5 %

13.7 %

13.7 %

14.5 %

MFC’s net sales in the fourth quarter of 2023 decreased $116 million, or 4%, compared to the same period in 2022. The decrease was primarily attributable to lower net sales of approximately $150 million for integrated air and missile defense programs primarily due to supplier cost timing on PAC-3, partially offset by higher net sales of approximately $60 million for tactical and strike missile programs due to production ramp up on Long Range Anti-Ship Missile (LRASM) and Joint Air-to-Surface Standoff Missile (JASSM).

MFC’s operating profit in the fourth quarter of 2023 decreased $56 million, or 12%, compared to the same period in 2022. The decrease was primarily attributable to lower operating profit for tactical and strike missile programs due to a $40 million loss recognized on a classified program. Total net profit booking rate adjustments were $30 million lower in the fourth quarter of 2023 compared to the same period in 2022.

MFC’s net sales in 2023 decreased $64 million, or 1% compared to the same period in 2022. Net sales decreased $165 million for integrated air and missile defense programs due primarily to supplier cost timing on PAC-3 and $115 million for sensors and global sustainment programs due primarily to the absence in 2023 of the impact of a favorable profit adjustment on an international program in 2022. These decreases were partially offset by higher net sales of $145 million for tactical and strike missile programs primarily due to production ramp up on JASSM, LRASM, and precision fires programs.

MFC’s operating profit in 2023 decreased $96 million, or 6%, compared to 2022. The decrease was primarily attributable to lower operating profit for tactical and strike missile programs due to $45 million of losses recognized on a classified program. Total net profit booking rate adjustments were $95 million lower in 2023 compared to 2022.

Rotary and Mission Systems

(in millions)

Quarters Ended Dec. 31,

Years Ended Dec. 31,

2023

2022

2023

2022

Net sales

$     4,711

$     4,803

$      16,239

$      16,148

Operating profit

579

567

1,865

1,906

Operating margin

12.3 %

11.8 %

11.5 %

11.8 %

RMS’ net sales in the fourth quarter of 2023 decreased $92 million, or 2%, compared to the same period in 2022. The decrease was primarily attributable to lower net sales of $115 million on integrated warfare systems and sensors (IWSS) programs due to lower volume on the Multi-Mission Surface Combatant (MMSC) program and $80 million for training and logistics solutions (TLS) programs due to lower volume. These decreases were partially offset by higher net sales of $140 million for Sikorsky helicopter programs due to higher deliveries on international Black Hawk programs.

RMS’ operating profit in the fourth quarter of 2023 increased $12 million, or 2%, compared to the same period in 2022. The increase was primarily driven by favorable contract mix across the IWSS programs portfolio. Total net profit booking rate adjustments in the fourth quarter of 2023 were comparable to the same period in 2022.

RMS’ net sales in 2023 increased $91 million, or 1% compared to the same period in 2022. Higher net sales of $265 million on IWSS programs due to higher volume on the Aegis program and new program ramp ups within the radar and laser systems portfolios were partially offset by lower net sales of $55 million for Sikorsky helicopter programs due to lower Black Hawk production volume.

RMS’ operating profit in 2023 decreased $41 million, or 2%, compared to 2022. The decrease was primarily attributable to lower operating profit for Sikorsky helicopter programs primarily due to an unfavorable profit adjustment of $100 million in the second quarter of 2023 on the Canadian Maritime Helicopter Program (CMHP) and lower Black Hawk production volume. This decrease was partially offset by higher operating profit for IWSS programs primarily due to a favorable profit adjustment of $65 million in the second quarter of 2023 on an international surveillance and control program, along with higher volume on the Aegis program. Total net profit booking rate adjustments were $100 million lower in 2023 compared to 2022.

Space

(in millions)

Quarters Ended Dec. 31,

Years Ended Dec. 31,

2023

2022

2023

2022

Net sales

$     3,379

$     3,266

$      12,605

$      11,532

Operating profit

307

234

1,158

1,057

Operating margin

9.1 %

7.2 %

9.2 %

9.2 %

Space’s net sales in the fourth quarter of 2023 increased $113 million, or 3%, compared to the same period in 2022. The increase was primarily attributable to higher net sales of $155 million for strategic and missile defense programs due to ramp up in the Next Generation Interceptor (NGI) development program.

Space’s operating profit in the fourth quarter of 2023 increased $73 million, or 31%, compared to the same period in 2022. Total net profit booking rate adjustments across the portfolio were $90 million higher in the fourth quarter of 2023 compared to the same period in 2022.

Space’s net sales in 2023 increased $1.1 billion, or 9%, compared to 2022. The increase was primarily attributable to higher net sales of $620 million for strategic and missile defense programs due to ramp up in the NGI development program and higher volume in the Fleet Ballistic Missile (FBM) program; and higher net sales of $225 million for national security space programs due to development ramp up on Transport Layer and classified programs.

Space’s operating profit in 2023 increased $101 million, or 10%, compared to 2022. The increase was primarily attributable to higher operating profit of $140 million for national security space programs due to the absence of unfavorable profit adjustments in 2023 on a ground solutions program and higher net favorable profit adjustments in classified programs. This increase was partially offset by $80 million of lower equity earnings resulting from lower launch volume and an increase in new product development costs at United Launch Alliance (ULA). Total net profit booking rate adjustments were $150 million higher in 2023 compared to 2022.

Total equity earnings (primarily ULA) for the quarter ended Dec. 31, 2023 were not significant, compared to approximately $15 million, or 6% for the same period in 2022. Total equity earnings for the year ended Dec. 31, 2023 were $20 million, or 2% of Space’s operating profit, compared to approximately $100 million, or 9% in 2022.

Income Taxes

The company’s effective income tax rate was 13.0% and 14.5% for the quarter and year ended Dec. 31, 2023, compared to 12.7% and 14.2% for the quarter and year ended Dec. 31, 2022. The rates for all periods benefited from research and development tax credits, tax deductions for foreign derived intangible income, dividends paid to the company’s defined contribution plans with an employee stock ownership plan feature and employee equity awards.

Use of Non-GAAP Financial Measures

This news release contains the following non-generally accepted accounting principles (non-GAAP) financial measures (as defined by U.S. Securities and Exchange Commission (SEC) Regulation G). While management believes that these non-GAAP financial measures may be useful in evaluating the financial performance of the company, this information should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP. In addition, the company’s definitions for non-GAAP financial measures may differ from similarly titled measures used by other companies or analysts.

Business segment operating profit

Business segment operating profit represents operating profit from the company’s business segments before unallocated income and expense. This measure is used by the company’s senior management in evaluating the performance of its business segments and is a performance goal in the company’s annual incentive plan. Business segment operating margin is calculated by dividing business segment operating profit by sales. The table below reconciles the non-GAAP measure business segment operating profit with the most directly comparable GAAP financial measure, consolidated operating profit.

(in millions)

 

2024 Outlook

Business segment operating profit (non-GAAP)

$7,175 – $7,375

FAS/CAS operating adjustment1

~1,625

Intangible asset amortization expense

~(245)

Other, net

~(400)

Consolidated operating profit (GAAP)

~$8,155 – $8,355

1

Reflects the amount by which expected total CAS pension cost of $1.7 billion, exceeds the expected FAS pension service cost and excludes
expected non-service FAS pension income. Refer to the supplemental table “Selected Financial Data” included in this news release for a
detail of the FAS/CAS operating adjustment.

Free cash flow

Free cash flow is cash from operations less capital expenditures. The company’s capital expenditures are comprised of equipment and facilities infrastructure and information technology (inclusive of costs for the development or purchase of internal-use software that are capitalized). The company uses free cash flow to evaluate its business performance and overall liquidity and it is a performance goal in the company’s annual and long-term incentive plans. The company believes free cash flow is a useful measure for investors because it represents the amount of cash generated from operations after reinvesting in the business and that may be available to return to stockholders and creditors (through dividends, stock repurchases and debt repayments) or available to fund acquisitions or other investments. The entire free cash flow amount is not necessarily available for discretionary expenditures, however, because it does not account for certain mandatory expenditures, such as the repayment of maturing debt and pension contributions.

Adjusted earnings before income taxes; adjusted net earnings and adjusted diluted EPS

Earnings before income taxes, net earnings and diluted earnings per share (EPS) were impacted by certain non-operational items for all periods. Management believes the presentation of these measures adjusted for the impacts of these non-operational items is useful to investors in understanding the company’s underlying business performance and comparing performance from period to period. The tax effects related to each adjustment that impacted earnings before income taxes are based on a blended tax rate that combines the federal statutory rate of 21% plus an estimated state tax rate.

For additional information, visit the company’s website: www.lockheedmartin.com.

About Lockheed Martin

Headquartered in Bethesda, Maryland, Lockheed Martin Corporation is a global security and aerospace company that employs approximately 122,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.