John W. Mollard
Acting Chief Financial Officer at Lockheed Martin
Thanks, Jim, and good morning, everyone. As I highlight our results, please follow along with the web charts we have included with our earnings release today. Let's begin with Chart 3 and an overview of third quarter activity.
Starting with sales, we reported revenue of $16 billion. This result was below our expectation as we realized larger-than-anticipated supply chain impacts across Aeronautics, Missiles and Fire Control and Space. These impacts span multiple suppliers, and our expectation is that we will incrementally recover from these disruptions over the next 12 to 18 months.
Despite this reduction in sales volume, our segment operating profit increased year-over-year to $1.9 billion on strong operational performance across the enterprise. Our earnings per share of $2.21 included a noncash charge of $4.72 related to our previously announced pension transaction. We generated $1.9 billion in cash from operations and continued our practice of accelerating payments to our supply chain with $1.5 billion in accelerated payments at quarter-end.
The supply chain disruptions we experienced during the third quarter underscore the fact that many of our suppliers are still dealing with the financial stress caused by the global pandemic. In addition, we continue to return substantial amounts of capital to our shareholders through both dividend payments and share repurchase activity. And we have provided trending data for 2022, which we will discuss further in a few minute.
Turning to Chart 4, we compare our sales and segment operating profit this year with last year's results. As we noted in our earnings release, our third quarter sales are below 2020 levels, primarily because of the renationalization of the Atomic Weapons Establishment program in our space business area. Our third quarter sales also reflect recent supply chain delays, most notably on the F-35 production activity and on several production programs within both Missiles and Fire Control and Space. Despite this reduction in sales volume, our third quarter segment operating profit is up from last year as strong operational performance resulted in significant risk retirements across all four business areas.
Chart 5 shows our earnings per share for the quarter. Our earnings per share of $2.21 incorporates a $4.72 noncash charge associated with the $4.9 billion pension liability transfer we completed back in August. On an adjusted basis, our pre-transaction earnings per share of $6.93 was 11% higher than our 2020 results due to improved segment operating margins, reduced share count and another quarter of mark-to-market gains across our Lockheed Martin Ventures portfolio.
While future volatility associated with investments in early-stage companies as expected, the significant gains realized across multiple holdings in our Ventures portfolio, reinforce the value of investing in and partnering with companies focused on cutting-edge technologies.
On Chart 6, we will look at our year-to-date cash generation and deployment. Subtracting our capital expenditures from almost $5 billion of cash from operations, our year-to-date free cash flow is greater than $4 billion. We've repurchased $2 billion of shares year-to-date, including $500 million during the third quarter and have made more than $2 billion in dividend payments.
In total, our balanced cash deployment of nearly $4.2 billion represents over 100% of free cash flow returned to our shareholders year-to-date. And we will continue these shareholder-friendly actions going forward as evidenced by our recent dividend increase and share repurchase program announcements.
Moving on to Chart 7 and our 2021 guidance update. We've lowered our 2021 outlook for sales and segment operating profit to reflect the previously discussed supply chain impacts that emerged in August and September. We've reduced our outlook for cash from operations primarily to reflect our updated plan to maintain our current $1.5 billion level of accelerated payments to our supply chain. We plan to continue supporting our suppliers as they recover from pandemic-related impacts, especially small and medium businesses, both across the country and internationally, to help maintain program schedules and customer missions.
The full year outlook for earnings per share has increased $0.35 from the midpoint of last quarter's range driven by Lockheed Martin Ventures investment gains in several nonoperational items.
Now turning to Chart 8. We take a closer look at the current year revisions to 2021 sales by business area. As discussed, Aeronautics, Missiles and Fire Control and Space have all been affected by lower-than-anticipated activity coming through our supply chain. The level of reduction in supply chain activity over the past two months is higher than what we've been experiencing since the beginning of the pandemic, and our 2021 sales outlook assumes that we will see a return to more normal activity levels in the fourth quarter. In addition, our sales outlook for 2021 and our trending information for 2022 excludes any potential impacts associated with the recent executive order on safety protocols for federal contractors.
On Chart 9, we see segment operating profit tracking with the reduction in expected sales volume. And our expected segment operating margin outlook remains at 11%.
On Chart 10, we take a closer look at our initial trending information for 2022. We've estimated 2022 sales at approximately $66 billion, a decline of 1.5% from our projected 2021 results. As a reminder, the renationalization of our work in support of the United Kingdom's Atomic Weapons Establishment earlier this year creates a headwind of just under $900 million on a year-over-year basis.
We are expecting segment operating margins to remain at approximately 11%, and we are projecting growth in cash from operations year-over-year to greater than or equal to $8.4 billion. This outlook assumes there will be no increase in tax payments related to capitalizing R&D costs. If current legislation is not amended, our cash from operations outlook could be reduced by up to $2 billion.
Also, given we continue experiencing impacts across our supply chain, we now anticipate maintaining accelerated payments at the current $1.5 billion level through year-end 2022. Our prior multiyear cash forecast assume there would no longer be a need to accelerate payments to our supply chain beyond 2021.
We are currently assuming a statutory corporate tax rate of 21% and we have not included any financial projections associated with closing the Aerojet Rocketdyne acquisition, which, as Jim mentioned, is now expected to occur during the first quarter of 2022, subject to required regulatory approval.
Turning to pension-related assumptions. Interest rates have increased since year-end 2020. Our year-to-date actual returns have been higher than previously expected and we've lowered our long-term rate of return to 6.5%. And in response to investors asking for additional information on pension trends, we have included two charts on this topic in the appendix. These trends include no required pension contributions through 2025 based on current assumptions.
On Chart 11, we outlined our expected capital deployment activities for 2022. We anticipate spending approximately $2 billion on capital projects next year, which represents an increase of approximately $300 million over expected 2021 levels. In addition, we anticipate investing approximately $1.5 billion on independent research and development activities, which represents a $200 million increase over planned 2021 levels. These investments are being made to enhance our delivery of critical systems and products to our customers as they execute their national security missions while ensuring we are well positioned to compete for new business opportunities.
We will be making over $3 billion in dividend payments next year based on a recently announced $0.20 per share increase to our quarterly dividend rate. And as Jim shared earlier, we will also continue to strategically buy back shares when we believe they are trading below intrinsic value as they are now. We are planning to opportunistically repurchase up to $6 billion in shares over the next 12 to 18 months. We are confident we have the balance sheet flexibility and firepower to pursue all avenues of growth while returning significant capital to our shareholders.
On Chart 12, we provide some additional detail on our expected long-term trajectory for F-35 sales. As Jim commented earlier, we recently reached agreement with the joint program office on our expected F-35 delivery plan. This joint plan represents the best intersection of production operations and supply chain capabilities, technology insertion in support of increasing mission requirements and both the timing and quantity of anticipated new production aircraft award decisions. We are very pleased with the outcome of this joint production replan as it provides stability and predictability across all key elements of this program.
Deliveries are expected to grow to 156 aircraft by 2023 and will remain at that level for the foreseeable future. We are projecting F-35 production sales in 2022 will be lower than 2021 levels and sales will also decline slightly in 2023. Revenues are expected to remain around 2023 levels throughout the balance of the forecasted time frame.
As we've previously discussed, the growth in F-35 sales volume will primarily be driven by sustainment activity as the number of deployed aircraft and associated flight hours grows rapidly while we continue to aggressively pursue cost takeout in partnership with our customer. Finally, we are also projecting modest growth in development activity as our customers continue seeking further advancements and capabilities for our unrivaled fifth-generation aircraft.
To conclude, on Chart 14, we have our summary. We've reduced our 2021 outlook based on the higher-than-expected supply chain impacts we experienced during the third quarter. The supply chain and related production impacts, along with our updated F-35 production plan and the other factors Jim mentioned, have shaped our outlook for 2022 and our future expectations.
Our strong balance sheet and cash generation give us multiple options to deploy cash. And to echo Jim, we will prioritize investments, which will grow free cash flow per share. And with our broad portfolio dedicated employees, strong balance sheet and a disciplined and dynamic capital allocation strategy, we remain focused on our customers' mission and long-term value creation for our shareholders.
With that, John, we're ready to begin the Q&A.