James D. Taiclet
Chairman, President and Chief Executive Officer at Lockheed Martin
Thanks, Maria, and good morning, everyone. Hope you've all had a good start to the new year, and I thank you for joining us on our fourth quarter 2022 earnings call, as we review our results, key business area accomplishments, and our outlook for 2023. I'd like to begin with a few highlights from the quarter and from the year, and then Jay will review the financials in a more detailed manner.
Lockheed Martin had a strong close to 2022. All of our business areas met or exceeded our prior expectations, resulting in a 2022 full-year sales of $66 billion. Segment operating profit of $7.2 billion, and earnings per share of $21.66. Our free cash flow for the year of $6.1 billion also came in above our prior expectation, while backlog for the year increased to $150 billion, driven by all-time record orders for Lockheed Martin. Our financial results included more than $1.7 billion of Independent Research and Development investments, or IRAD, a new high watermark for the company. We also continue to modernize and streamline our operations to increase efficiencies and reduce costs. Significant capital projects include our ongoing investment in what we call One Lockheed Martin transformation or 1LMX. This is our multiyear internal project to transform our business processes and systems from end-to-end, by implementing new digital tools in our operations and expanding our use of model-based engineering to enhance our speed-to-market and our cost competitiveness.
In 2022, we completed a majority of the detailed design for our new systems and business processes. And for 2023, we expect to complete the detailed design and implementation roadmaps that go with it, and then we'll transition to the system build and configuration phase over the next couple of years. These IRAD and capital investments accelerate the capabilities our customers need and for our operations to efficiently and effectively meet those needs. From a capital return perspective, we delivered approximately $11 billion to shareholders in 2022 via share repurchases of $7.9 billion, and dividends of $3 billion.
During the fourth quarter specifically, we entered into a $4 billion-accelerated share repurchase program, and we've retired approximately 7 million shares under that agreement so far. We expect to complete our remaining repurchase authorization of $10 billion over the next few years, consistent with our focus to deliver free cash flow per share growth to you, the investor. These operational and financial results created significant value for our shareholders, ending the year with a total shareholder return of 40%.
I will touch briefly now on the Department of Defense, or DoD, budget. In late December, Congress signed the FY '23 OMNIBUS spending bill into law, appropriating $858 billion for national defense, including $817 billion for the DoD-based budget. This reflects approximately 10% growth year-over-year for both national defense and the DoD-based budget. The law also represents a 6% or $45 billion increase from the President's budget request for DoD. These appropriations enabled us, along with the Joint Program Office, to finalize the contract for the production and delivery of up to 398 F-35s for $30 billion, in Lots 15 and 16, including the option for Lot 17. Further, several other of Lockheed Martin programs received the funding levels necessary to drive the growth outlook we previously identified, including our Combat Rescue Helicopter, the C-130J, Black Hawk, CH-53K and FAAD. We view this funding outcome as positive for the future, and our current expectation is that growth will materialize over the longer-term, starting in 2024.
Let's now turn to the four growth pillars: programs of record, hypersonics, classified activities and new awards. With regard to programs of record, there were several important developments in key signature programs in our fourth quarter. On the F-35, the definitization of Lots 15 through 17, as I mentioned a minute ago, included the first F-35 aircraft to be produced for Belgium, Finland and Poland. We received authorization to procure long lead items for Lot 18, F-35 aircraft for the US Air Force, Marine Corps, Navy and US allies as well. We also formally welcome Germany, the ninth foreign military sales country, to the F-35 Lightning II program.
And earlier in January, Canada officially became an F-35 operator as the country selected the aircraft to replace its aging fighter fleet. We continue to expect deliveries of the F-35 to ramp to 156 by 2025. Despite the temporary pause in flight operations and corresponding suspension of engine deliveries that began in December and resulted in the delivery of just 141 F-35s in 2022, seven shy of our expectation of 148 before the engine issue was discovered. Also in the quarter, the US Navy authorized the CH-53K King Stallion heavy-lift helicopter to enter full rate production and then its deployment phase. This important milestone allows the program to proceed beyond low-rate initial production. And this achievement attests to our long-standing partnership with the US Marine Corps and instills confidence and stability in Sikorsky's diverse domestic supply chain.
In addition, at Sikorsky, international demand for the Black Hawk remains strong. Last week, the Australian Army announced it will acquire 40 UH-60M BLACK HAWK helicopters to replace its current multi-role helicopter fleet. Deliveries are expected to begin for Australia this year. Further, the Lockheed Martin built Orion exploration class spacecraft launched on NASA's Artemis 1 and completed a 25-day flight test, slashing down off the coast of California. This successful mission takes us one step closer to the first woman and first person of color setting foot on the moon. On its journey, Orion traveled more than 1.4 million miles through deep space and surpassed records for total distance. It traveled 270,000 miles from home and the farthest distance from earth by a spacecraft designed to carry humans. We look forward to the next stages of the program with seven additional missions under contract.
Turning to hypersonics. In December, Lockheed Martin Missiles and Fire Control and the US Air Force successfully conducted a hypersonic-boosted flight test of the Air-Launched Rapid Response Weapon. This was the first launch of a full prototype operational missile, meeting all its objectives for the test, including reaching speeds of greater than five times the speed of sound. With regard to classified programs, we achieved successful milestones across multiple business areas in 2022 and grew 5% year-over-year. We continue to expect growth in classified that will outpace the rest of the portfolio over the next several years.
And finally, at new awards, Lockheed Martin's Next Generation Interceptor, or NGI, continues to make progress. In late October, we announced the delivery of the first NGI flight software package to the Missile Defense Agency, providing the framework of software development tools, process workflows, scripts and environments. The delivery was ahead of schedule and is a critical step on the path for flight testing and fielding. This program remains a focused competition for Lockheed Martin with the first NGI forecast for delivery in 2027.
With regard to the Future Long-Range Assault Aircraft or FLRAA competition, we were disappointed in the US Army's decision. And upon review, we determined a formal protest by Sikorsky on behalf of team Defiant to be the best course of action. We continue to believe that DEFIANT X with its increased speed, range, maneuverability and survivability is the transformational and most cost-effective aircraft that best meets the selection criteria for this competition. Sikorsky remains one of two competitors for the other component of the Future Vertical Lift initiative that's called the Future Attack Reconnaissance Aircraft, or FARA, which is currently expected to be awarded in 2025.
The first RAIDER X competitive prototype is over 90% complete and has more than 65% of its acceptance test procedures already done. Sikorsky is the only company with a representative FARA technology demonstrator aircraft. I saw it fly down at West Palm Beach a few months ago. It's amazing, the S-97 Raider, which has completed more than 110 flight hours. In November, Norway became the first international customer for our new TPY-4 Radar. It's the first software-defined Radar that outperforms in target detection, mission diversity and transportability. Norway is going to receive eight of Lockheed Martin's TPY-4 Radars with options for three additional Radars.
Finally, backlog ended 2022 at $150 billion with book-to-bill of 1.2 times and increases in every business area across Lockheed Martin. This strong demand signal bodes well for future growth over the longer term for our company. So these four pillars will guide us as we face a challenging geopolitical environment and apply growth and integrated capabilities mindset to everything we do here. As conflict continues in Ukraine, unfortunately, and projected global threats require coordinated efforts to protect the US and our allied territories, ongoing progress in our 21st Century Security vision will enable the acceleration of advanced capabilities to deter these threats and drive effective Joint All Domain Operations for our military service customers.
In the fourth quarter, we continued to announce and expand strategic agreements with America's leading commercial digital companies, such as IBM's Red Hat, to advance artificial intelligence innovation on Lockheed Martin military platforms. And for Microsoft, with whom we're going to help power classified cloud advanced technologies for the Department of Defense. Microsoft's latest secure framework will make Lockheed Martin the first non-government entity to independently operate inside the Microsoft Azure Government Secret Cloud, ushering in a new era of cloud opportunities for the industry.
As we look ahead, demand for Lockheed Martin platforms and systems is strong in the United States and abroad. We continue to expect 2023 sales about the same level as we discussed back in October. We also continue to expect a return to sustained top line growth in 2024 and beyond as headwinds diminish in our program mix, the supply chain continues to recover and our signature programs grow. Free cash flow per share will remain a key focus as we maximize returns for you, our shareholders. 2022 is a year of great accomplishments for our company in the face of a lot of dynamic challenges. The outstanding achievements of our teams resulted from real deep commitments across our business areas and better cooperation among them as well as our corporate functions to develop, produce and deliver world-class systems to our country and its allies. Our progress this year is a testament to the dedication of our 116,000 team members and the values we all share.
So with that, let me hand it off to Jay to give more color on the financials, and we'll join you later to answer your questions. Jay?
