* Adjusted segment operating income and margin, effective tax rate on non-GAAP income, non-GAAP diluted EPS, pension adjusted non-GAAP diluted EPS, organic revenue and adjusted free cash flow are non-GAAP financial measures defined on page 17. A reconciliation of adjusted segment operating income and margin, effective tax rate on non-GAAP income, non-GAAP diluted EPS and adjusted free cash flow on a forward-looking basis to GAAP is not available without unreasonable effort due to the unavailability of items for exclusion from the GAAP measure. We are unable to address the probable significance of this information, the variability of which may have a significant impact on future GAAP results. See Non-GAAP Financial Measures on page 7 for more information.
Operating Margin:
GAAP: Third quarter operating margin decreased 30 bps to 9.4% primarily driven by an increase in unallocated items, including an increase in valuation allowance related to the pending Commercial Aviation Solutions business divestiture and increases in fair value of non-qualified retirement plan liabilities. This was partially offset by improved segment performance and a full quarter of contribution from AR.
Adjusted segment operating margin: Expanded 70 bps to 15.7%, with solid contribution from LHX NeXt cost savings, strong performance from higher volume and favorable mix in our CS segment, and improved program performance in our IMS segment. This was partially offset by the absence of a non-recurring license sale that positively impacted 2023 and challenges on classified space development programs, both in our SAS segment.
Diluted EPS:
GAAP: Third quarter diluted EPS increased 4% to $2.10 due to an increase in operating income and lower FAS/CAS operating adjustment, partially offset by higher interest expense.
Non-GAAP: Increased 5% to $3.34 driven by higher adjusted segment operating income, partially offset by higher interest expense.
Pension Adjusted Non-GAAP: Increased 8% to $2.94 driven by higher adjusted segment operating income, partially offset by higher interest expense. We believe this represents the best economic measure of our EPS as it reflects the operational performance of our segments without non-cash impacts of pension accounting, primarily FAS/CAS operating adjustment.
The largest differences between GAAP and Non-GAAP diluted EPS are attributable to amortization of acquisition-related intangibles and LHX NeXt implementation costs.
Cash Flows:
Cash from Operations: Third quarter cash from operations increased 44% to $780 million driven by net income growth and decreases in transaction costs related to the AJRD acquisition, partially offset by timing of working capital.
Adjusted free cash flow: Increased 18% to $728 million driven by net income growth and decreases in capital expenditures, partially offset by timing of working capital.
SEGMENT RESULTS AND GUIDANCE*
SAS
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Third Quarter |
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Year to Date |
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2024 Guidance |
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($ millions) |
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2024 |
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2023 |
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Change |
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2024 |
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2023 |
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Change |
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Revenue |
$ |
1,683 |
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$ |
1,686 |
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— |
% |
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$ |
5,141 |
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$ |
5,056 |
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2 |
% |
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~$7,000 |
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Operating margin |
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11.6 |
% |
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12.5 |
% |
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(90) bps |
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12.2 |
% |
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11.2 |
% |
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100 bps |
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low 12% |
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