Christopher Kubasik: Yes. Thanks, Rob. Let me start — cover a couple of things and work in specifically your question. The demand, I mentioned earlier, there’s more demand than there is supply, which is a great thing when we look back on the acquisition. And to repeat myself, 200 proposals for $13 billion is something we would have never expected in just a six-month period. The infrastructure, great progress. We’ve got the $50 million. We’ve got the policies. We’ve got the personnel. The IT systems are in work. And in fact on the talent front, the attrition at Aerojet Rocketdyne has dropped by 1/3 overall and 50% for the engineers. We do these regular surveys. There’s just a lot of enthusiasm and excitement about the acquisition, the strategy.
And I think it’s a tribute to the team that shows how we successfully have integrated them and welcomed them into L3Harris. Going back to the demand, it’s all about capacity. We’ve talked about the DPA investment for $216 million focused on GMLRS and Javelin and Stinger. In fact, we’ve already acquired a building in Huntsville, Alabama. Our capacity and footprint there is 4x and that will ultimately — it is, but it will ultimately be our inert center of excellence, which is great. The challenges are really at the sub-tier suppliers, as you said. I don’t think it makes a lot of sense to bring them in-house. We’ve actually invested in some of these, not as an ownership, but by helping them with tooling and capital. Our customers have also — our end customer and our immediate prime customers have also invested.
So as we’ve said, there’s a little bit of a chokepoint here at the sub-tier. Personally, I think over time, a third solid rocket motor provider is fine. We don’t shy away from competition. But that doesn’t really solve the problem because at the end of the day, everybody’s going to be going to the same sub-tiers, for the cases, for the igniters, for the nozzles and such. So we have to fix the sub-tier. We’re doing our part by helping them out financially, getting the equipment, improving their — the capacity. And we started to see it. There is a big well documented, I think, we call it backlog or undelivered motors, and we’re chipping away at that, as I mentioned. And once we get these facilities and equipment up and running, I think it’s going to look pretty good.
And, yes, there’s a lot of people trying to get into this market now, which is fine. It’s a high-growth market, and in my mind, reaffirms the rationale and the value potential from this acquisition.
Operator: The next question comes from the line of Myles Walton with Wolfe Research. Please proceed with your question.
Myles Walton: Ken, I’m hoping you can provide a few of the cash details on the surface, the Section 174 impact for ’23 and ’24, maybe what the benefit would be if they retroactively reversed it, what you’ve paid and what you could get back. And then maybe just also as it relates to stripping out from the cash numbers, is it just the $220 million for LHX NeXt that you laid out at Investor Day? Or are there other adjustments we should consider? Thanks.
Kenneth Bedingfield: Thanks, Myles. Let me — I’ll talk about 174 a little bit first and then get into the second part of the question. So let me just start by saying we’ve got a great tax team that works really hard every day to drive value for the business. And one of the things that I think they do well and we do well in supporting them is getting them really integrated with the businesses so that we get all the data, we get all the information needed to support our R&D deductions and credits. We work very closely with the IRS team to validate what we’ve got and what we’re doing and how all that works. And I think we’ve done a great job. This is a business that invests heavily in R&D to drive future capability and future growth, and we’ll continue to do that, and we’ll continue to see that benefit.
In terms of the cash profile, what I’ll say is that, in ’23, we’re able to catch up a little bit on some tax payments from a timing perspective. In terms of the new amortization of Section 174, we’re able to kind of catch back up to being current through the end of ’23 on the impact — the cash impact of that. And then in terms of the new legislation that’s working through, I’ll say we’re tracking that carefully, keeping an eye on it. The impact of that, if it is passed into law, would be positive for us from a cash perspective. And I don’t want to put a number on it, but as currently drafted, would have some retroactive impact for, I believe, it’s ’22 and ’23. So positive on cash. And then I think there would ultimately be a little bit of a rate headwind as we look forward.
But I would say we’d be very willing to trade that little bit of rate benefit for the cash benefit that we see. And then in terms of kind of free cash flow guide for 2024 and the adjustments. At this point in time, what we’re looking at in terms of what that would be adjusted for would largely be the LHX NeXt onetime implementation cost. To your question, I think that should be the largest item there.
