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 Six Months Ended June 26, June 27, June 26, June 27, Net sales Aeronautics $ 5,862 $ 6,666 $ 12,263 $ 13,053 Missiles and Fire Control 2,747 2,944 5,199 5,693 Rotary and Mission Systems 4,012 4,242 7,564 8,349 Space 2,825 3,177 5,384 6,192 Total net sales $ 15,446 $ 17,029 $ 30,410 $ 33,287 Operating profit Aeronautics $ 612 $ 572 $ 1,291 $ 1,265 Missiles and Fire Control 418 401 802 797 Rotary and Mission Systems 403 458 751 891 Space 268 335 513 562 Total business segment operating profit 1,701 1,766 3,357 3,515 Unallocated items FAS/CAS pension operating adjustment 425 489 851 978 Severance and restructuring charges — — — (36) Other, net (163) (63) (312) (83) Total unallocated items 262 426 539 859 Total consolidated operating profit $ 1,963 $ 2,192 $ 3,896 $ 4,374 Intersegment sales Aeronautics $ 58 $ 52 $ 118 $ 105 Missiles and Fire Control 161 167 317 296 Rotary and Mission Systems 453 448 908 926 Space 99 92 182 174 Total intersegment sales $ 771 $ 759 $ 1,525 $ 1,501 Amortization of purchased intangibles Aeronautics $ (1) $ (1) $ (1) $ (1) Missiles and Fire Control — — (1) (1) Rotary and Mission Systems (58) (58) (116) (116) Space (3) (22) (6) (44) Total amortization of purchased intangibles $ (62) $ (81) $ (124) $ (162) 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 net FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension (expense) income and total CAS pension cost. The non-service FAS pension (expense) income components are included in non-service FAS pension (expense) 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 (expense) income, we have a favorable FAS/CAS pension operating adjustment. The total FAS/CAS pension adjustment for the quarters and six months ended June 26, 2022 and June 27, 2021, including the service and non-service cost components of FAS pension (expense) income for our qualified defined benefit pension plans, were as follows (in millions): Quarters Ended Six Months Ended June 26, June 27, June 26, June 27, Total FAS (expense) income and CAS cost Total FAS pension (expense) income $ (1,355) $ 67 $ (1,239) $ 133 Less: CAS pension cost 449 516 899 1,032 Total FAS/CAS pension adjustment $ (906) $ 583 $ (340) $ 1,165 Service and non-service cost reconciliation FAS pension service cost $ (24) $ (27) $ (48) $ (54) Less: CAS pension cost 449 516 899 1,032 Total FAS/CAS pension operating adjustment 425 489 851 978 Non-service FAS pension (expense) income (1,331) 94 (1,191) 187 Total FAS/CAS pension adjustment $ (906) $ 583 $ (340) $ 1,165 The decrease in the total FAS/CAS pension adjustment during the quarter and six months ended June 26, 2022 as compared to 2021 was principally driven by a noncash, non-operating pension settlement charge of $1.5 billion ($1.2 billion, or $4.33 per share, after-tax) recognized 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. 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 June 26, 2022 Aeronautics MFC RMS Space Total Net sales Products $ 4,804 $ 2,444 $ 3,150 $ 2,363 $ 12,761 Services 1,058 303 862 462 2,685 Total net sales $ 5,862 $ 2,747 $ 4,012 $ 2,825 $ 15,446 Net sales by contract type Fixed-price $ 3,916 $ 1,943 $ 2,589 $ 753 $ 9,201 Cost-reimbursable 1,946 804 1,423 2,072 6,245 Total net sales $ 5,862 $ 2,747 $ 4,012 $ 2,825 $ 15,446 Net sales by customer U.S. Government $ 3,963 $ 1,924 $ 2,785 $ 2,786 $ 11,458 International (a) 1,868 823 1,129 29 3,849 U.S. commercial and other 31 — 98 10 139 Total net sales $ 5,862 $ 2,747 $ 4,012 $ 2,825 $ 15,446 Net sales by geographic region United States $ 3,994 $ 1,924 $ 2,883 $ 2,796 $ 11,597 Europe 845 262 178 20 1,305 Asia Pacific 705 107 553 6 1,371 Middle East 222 417 201 3 843 Other 96 37 197 — 330 Total net sales $ 5,862 $ 2,747 $ 4,012 $ 2,825 $ 15,446 Six Months Ended June 26, 2022 Aeronautics MFC RMS Space Total Net sales Products $ 10,221 $ 4,617 $ 5,938 $ 4,479 $ 25,255 Services 2,042 582 1,626 905 5,155 Total net sales $ 12,263 $ 5,199 $ 7,564 $ 5,384 $ 30,410 Net sales by contract type Fixed-price $ 8,602 $ 3,656 $ 4,807 $ 1,390 $ 18,455 Cost-reimbursable 3,661 1,543 2,757 3,994 11,955 Total net sales $ 12,263 $ 5,199 $ 7,564 $ 5,384 $ 30,410 Net sales by customer U.S. Government $ 8,176 $ 3,519 $ 5,296 $ 5,302 $ 22,293 International (a) 4,018 1,675 2,100 63 7,856 U.S. commercial and other 69 5 168 19 261 Total net sales $ 12,263 $ 5,199 $ 7,564 $ 5,384 $ 30,410 Net sales by geographic region United States $ 8,245 $ 3,524 $ 5,464 $ 5,321 $ 22,554 Europe 1,868 518 365 44 2,795 Asia Pacific 1,426 213 985 13 2,637 Middle East 484 882 377 6 1,749 Other 240 62 373 — 675 Total net sales $ 12,263 $ 5,199 $ 7,564 $ 5,384 $ 30,410 Quarter Ended June 27, 2021 Aeronautics MFC RMS Space Total Net sales Products $ 5,583 $ 2,571 $ 3,369 $ 2,735 $ 14,258 Services 1,083 373 873 442 2,771 Total net sales $ 6,666 $ 2,944 $ 4,242 $ 3,177 $ 17,029 Net sales by contract type Fixed-price $ 4,920 $ 1,991 $ 2,802 $ 645 $ 10,358 Cost-reimbursable 1,746 953 1,440 2,532 6,671 Total net sales $ 6,666 $ 2,944 $ 4,242 $ 3,177 $ 17,029 Net sales by customer U.S. Government $ 4,367 $ 2,176 $ 3,063 $ 2,719 $ 12,325 International (a) 2,283 766 1,117 447 4,613 U.S. commercial and other 16 2 62 11 91 Total net sales $ 6,666 $ 2,944 $ 4,242 $ 3,177 $ 17,029 Net sales by geographic region United States $ 4,383 $ 2,178 $ 3,125 $ 2,730 $ 12,416 Europe 944 232 223 444 1,843 Asia Pacific 914 56 534 2 1,506 Middle East 311 467 177 1 956 Other 114 11 183 — 308 Total net sales $ 6,666 $ 2,944 $ 4,242 $ 3,177 $ 17,029 Six Months Ended June 27, 2021 Aeronautics MFC RMS Space Total Net sales Products $ 11,062 $ 4,981 $ 6,669 $ 5,299 $ 28,011 Services 1,991 712 1,680 893 5,276 Total net sales $ 13,053 $ 5,693 $ 8,349 $ 6,192 $ 33,287 Net sales by contract type Fixed-price $ 9,654 $ 3,869 $ 5,479 $ 1,259 $ 20,261 Cost-reimbursable 3,399 1,824 2,870 4,933 13,026 Total net sales $ 13,053 $ 5,693 $ 8,349 $ 6,192 $ 33,287 Net sales by customer U.S. Government $ 8,640 $ 4,217 $ 5,873 $ 5,270 $ 24,000 International (a) 4,382 1,469 2,337 904 9,092 U.S. commercial and other 31 7 139 18 195 Total net sales $ 13,053 $ 5,693 $ 8,349 $ 6,192 $ 33,287 Net sales by geographic region United States $ 8,671 $ 4,224 $ 6,012 $ 5,288 $ 24,195 Europe 1,798 414 424 899 3,535 Asia Pacific 1,807 107 1,184 4 3,102 Middle East 595 925 347 1 1,868 Other 182 23 382 — 587 Total net sales $ 13,053 $ 5,693 $ 8,349 $ 6,192 $ 33,287 (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 23% and 26% of our total consolidated net sales for the quarter and six months ended June 26, 2022 and 27% of our total consolidated net sales for both the quarter and six months ended June 27, 2021. Assets Total assets for each of our business segments were as follows (in millions): June 26, December 31, Assets Aeronautics $ 12,168 $ 10,756 Missiles and Fire Control 5,795 5,243 Rotary and Mission Systems 18,092 17,664 Space 6,527 6,199 Total business segment assets 42,582 39,862 Corporate assets (a) 9,176 11,011 Total assets $ 51,758 $ 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, investments held in a separate trust and investments held in the Lockheed Martin Ventures Fund. |