Lockheed Martin [LMT] on Tuesday posted solid results in its first quarter with earnings and sales higher and the company increased its outlook this year for the top and bottom lines.

The higher earnings in the quarter were aided by a gain in the company’s Ventures Fund business that invests in start-up and other small technology companies, partially offset by severance and restructuring costs in the Rotary and Mission Systems (RMS) segment that is being realigned to improve efficiency and affordability.

Net income in the quarter increased 7 percent to $1.8 billion, $6.58 earnings per share (EPS), from $1.7 billion ($6.08 EPS) a year ago, topping consensus estimates by 27 cents per share. The Lockheed Martin Ventures Fund contributed $51 million (18 cents EPS) after taxes to the bottom line, which was dented somewhat by the $28 million (10 cents EPS) in charges at RMS.

Sales in the quarter were up 4 percent to $16.3 billion from $15.7 billion a year ago.

Total operating margin in the quarter was down 20 basis points to 13.4 percent.

Results were mixed at the business segments. Sales were higher at RMS, Missiles and Fire Control (MFC), and Space, and were flat at Aeronautics. Operating profit was up at RMS and Aeronautics, flat at MFC and lower at Space.

Some of the key revenue drivers included an international pilot training system, classified programs in the Aeronautics segment, the VH-92A presidential helicopter, the Marine Corps CH-53K heavy-lift cargo helicopter, the Air Force HH-60W Combat Rescue Helicopter, the Patriot Advanced Capability-3 air and missile defense program, several tactical and strike missile programs, and an atomic weapons joint venture in the United Kingdom.

Profit drivers include lower included higher risk retirement on the Aegis combat system, the PAC-3 program, risk retirements on F-16 fighter sustainment contracts and higher aircraft production, risk retirements on F-35 fighter production contracts, tactical missiles, the international pilot training and helicopter programs, and an improvement in commercial civil space programs.

Free cash flow in the quarter was nearly $1.5 billion and backlog stood at $147.4 billion, essentially level with $147.1 billion at the end of 2020. The company still expects to approach $150 billion in backlog by the end of 2021 with key orders coming for F-35 production for U.S. and international customers, international orders for the F-16, C-130 cargo plane, Marine Corps CH-53K production, and the PAC-3 system, Ken Possenriede, Lockheed Martin’s chief financial officer, said during an earnings call with analysts.

For 2021, Lockheed Martin is forecasting sales of between $67.3 billion and $68.7 billion, up $200 million from the prior guidance range. Earnings are projected to between $26.40 and $26.70 EPS. 40 cents higher than the previous outlook.

The increase in the earnings outlook is driven by the Ventures Fund gain, lower taxes related to a federal COVID stimulus program, accelerated stock repurchases in the first quarter that lowered the share count, and improved performance at RMS, partially offset by the charges at RMS.

Lockheed Martin also expects to generate at least $8.9 billion in cash this year, up $600 million from prior guidance because the company doesn’t plan to make a $1 billion discretionary contribution to its pension plan due to provisions in the COVID stimulus bill, Possenriede, said. The benefit was partially offset by a reduction in pension tax deductions, he said.

Increases in cash flow are also projected for 2022 and 2023 because of the stimulus bill, which allows the company to recover pension pre-funding credits by 2026, likely eliminating the need to make a pension contribution before then, Possenriede said. Overall, Lockheed Martin expects to generate $1 billion more in cash flow than expected from 2021 through 2023, he said.

The financial outlook excludes Lockheed Martin’s pending $4.4 billion acquisition of Aerojet Rocketdyne

[AJRD], which is still being reviewed by federal regulators. James Taiclet, Lockheed Martin’s president and CEO, on the earnings call tried to relieve concerns of regulators and competitors whom may be concerned that the acquisition will lessen competition in the marketplace.

“We also plan to strengthen Aerojet Rocketdyne’s capabilities as a merchant supplier with improved offerings for all of its industry and government customers, which is a critical component of closing our acquisition business case,” Taiclet said.

Aerojet Rocketdyne and Northrop Grumman [NOC] through its acquisition of the former Orbital ATK, compete to supply rocket and tactical motors for launch vehicles, tactical missiles and missile defense systems for aerospace and defense customers.

Taiclet expects regulators to approve the deal by late 2021. Previously, the company has said it expects the acquisition to close in the second half of this year.