[10-Q] Lockheed Martin Corp. Quarterly Earnings Report
Filing Impact
Filing Sentiment
Form Type
10-Q
Ikena Oncology (IKNA) filed an 8-K announcing its board has declared a one-time special dividend of one contingent value right (CVR) for every outstanding share held as of the close of business on 24 Jul 2025. The CVRs are being issued in connection with the previously disclosed two-step merger with Inmagene Biopharmaceuticals.
Under the contemplated CVR Agreement, holders will receive (i) 100% of net proceeds, if any, from milestone, royalty or earn-out payments tied to dispositions of IKNA’s pre-merger assets and (ii) 90% of net proceeds from dispositions executed within one year after closing, both after permitted deductions (taxes, expenses, litigation and wind-down costs). If no such proceeds arise during the CVR term, the CVRs will expire worthless.
The merger structure remains unchanged: Merger Sub I merges into Inmagene, followed immediately by Inmagene into Merger Sub II, creating a wholly-owned subsidiary of IKNA. Forward-looking statements caution that closing conditions, expense control, legal proceedings and asset-sale milestones may affect both the merger and any CVR payout.
Ikena Oncology (IKNA) ha presentato un modulo 8-K annunciando che il suo consiglio di amministrazione ha dichiarato un dividendo speciale una tantum consistente in un diritto di valore contingente (CVR) per ogni azione in circolazione detenuta alla chiusura delle attività del 24 luglio 2025. I CVR vengono emessi in relazione alla fusione in due fasi precedentemente comunicata con Inmagene Biopharmaceuticals.
Secondo l'accordo previsto sui CVR, i detentori riceveranno (i) il 100% dei proventi netti, se presenti, derivanti da milestone, royalty o pagamenti legati alla cessione degli asset di IKNA antecedenti alla fusione e (ii) il 90% dei proventi netti da cessioni effettuate entro un anno dalla chiusura, entrambi dopo le deduzioni consentite (tasse, spese, contenziosi e costi di chiusura). Se non dovessero emergere proventi durante il periodo di validità dei CVR, questi scadranno senza valore.
La struttura della fusione rimane invariata: Merger Sub I si fonde con Inmagene, seguita immediatamente dalla fusione di Inmagene in Merger Sub II, creando una controllata interamente posseduta da IKNA. Le dichiarazioni previsionali avvertono che condizioni di chiusura, controllo delle spese, procedimenti legali e milestone di vendita degli asset potrebbero influenzare sia la fusione sia qualsiasi pagamento derivante dai CVR.
Ikena Oncology (IKNA) presentó un formulario 8-K anunciando que su junta directiva ha declarado un dividendo especial único de un derecho de valor contingente (CVR) por cada acción en circulación que se posea al cierre de operaciones el 24 de julio de 2025. Los CVR se emiten en relación con la fusión en dos etapas previamente divulgada con Inmagene Biopharmaceuticals.
Bajo el acuerdo previsto del CVR, los titulares recibirán (i) el 100% de los ingresos netos, si los hubiera, provenientes de hitos, regalías o pagos condicionados vinculados a la disposición de los activos previos a la fusión de IKNA y (ii) el 90% de los ingresos netos de las disposiciones realizadas dentro del año siguiente al cierre, ambos después de deducciones permitidas (impuestos, gastos, litigios y costos de liquidación). Si no se generan ingresos durante el periodo del CVR, estos expirarán sin valor.
La estructura de la fusión permanece sin cambios: Merger Sub I se fusiona con Inmagene, seguido inmediatamente por la fusión de Inmagene en Merger Sub II, creando una subsidiaria de propiedad total de IKNA. Las declaraciones prospectivas advierten que las condiciones de cierre, control de gastos, procedimientos legales y hitos de venta de activos pueden afectar tanto la fusión como cualquier pago de CVR.
Ikena Oncology (IKNA)는 8-K 보고서를 제출하여 이사회가 2025년 7월 24일 영업 종료 시점 기준으로 보유한 모든 주식에 대해 1회성 특별 배당으로 1개의 조건부 가치 권리(CVR)를 선언했다고 발표했습니다. CVR은 이전에 공개된 Inmagene Biopharmaceuticals와의 2단계 합병과 관련하여 발행됩니다.
예정된 CVR 계약에 따라 보유자는 (i) 합병 전 IKNA 자산 처분과 관련된 마일스톤, 로열티 또는 수익 연동 지급금에서 발생하는 순수익 100%를, (ii) 종료 후 1년 이내에 실행된 처분에서 발생하는 순수익 90%를 각각 허용된 공제(세금, 비용, 소송 및 청산 비용) 후에 받게 됩니다. CVR 기간 동안 수익이 발생하지 않으면 CVR은 무가치하게 만료됩니다.
합병 구조는 변경되지 않았습니다: Merger Sub I이 Inmagene에 합병된 후 즉시 Inmagene가 Merger Sub II에 합병되어 IKNA의 완전 자회사로 설립됩니다. 미래 예측 진술은 종결 조건, 비용 통제, 법적 절차 및 자산 매각 마일스톤이 합병 및 CVR 지급에 영향을 미칠 수 있음을 경고합니다.
Ikena Oncology (IKNA) a déposé un formulaire 8-K annonçant que son conseil d'administration a déclaré un dividende spécial unique consistant en un droit à valeur conditionnelle (CVR) pour chaque action en circulation détenue à la clôture des opérations le 24 juillet 2025. Les CVR sont émis dans le cadre de la fusion en deux étapes précédemment divulguée avec Inmagene Biopharmaceuticals.
Conformément à l'accord CVR envisagé, les détenteurs recevront (i) 100 % des produits nets, le cas échéant, provenant des paiements liés à des jalons, redevances ou paiements différés liés à la cession des actifs d'IKNA antérieurs à la fusion, et (ii) 90 % des produits nets des cessions effectuées dans l'année suivant la clôture, les deux après déductions autorisées (impôts, frais, litiges et coûts de liquidation). Si aucun produit n'est généré pendant la durée des CVR, ceux-ci expireront sans valeur.
La structure de la fusion reste inchangée : Merger Sub I fusionne avec Inmagene, suivi immédiatement par la fusion d'Inmagene dans Merger Sub II, créant une filiale en propriété exclusive d'IKNA. Les déclarations prospectives avertissent que les conditions de clôture, le contrôle des dépenses, les procédures judiciaires et les jalons de vente d'actifs peuvent affecter à la fois la fusion et tout paiement lié aux CVR.
Ikena Oncology (IKNA) hat eine 8-K Meldung eingereicht, in der der Vorstand eine einmalige Sonderdividende in Form von einem bedingten Wertrecht (CVR) für jede ausstehende Aktie bekannt gibt, die zum Geschäftsschluss am 24. Juli 2025 gehalten wird. Die CVRs werden im Zusammenhang mit der zuvor bekanntgegebenen zweistufigen Fusion mit Inmagene Biopharmaceuticals ausgegeben.
Gemäß der vorgesehenen CVR-Vereinbarung erhalten die Inhaber (i) 100 % der Nettoprozesse, falls vorhanden, aus Meilenstein-, Lizenz- oder Earn-out-Zahlungen im Zusammenhang mit Veräußerungen von IKNAs vor der Fusion liegenden Vermögenswerten und (ii) 90 % der Nettoprozesse aus Veräußerungen, die innerhalb eines Jahres nach Abschluss erfolgen, jeweils nach zulässigen Abzügen (Steuern, Ausgaben, Rechtsstreitigkeiten und Abwicklungskosten). Sollten während der Laufzeit der CVRs keine Erlöse erzielt werden, verfallen diese wertlos.
Die Fusionsstruktur bleibt unverändert: Merger Sub I fusioniert mit Inmagene, unmittelbar gefolgt von der Fusion von Inmagene mit Merger Sub II, wodurch eine hundertprozentige Tochtergesellschaft von IKNA entsteht. Zukunftsgerichtete Aussagen weisen darauf hin, dass Abschlussbedingungen, Kostenkontrolle, Rechtsstreitigkeiten und Meilensteine bei Asset-Verkäufen sowohl die Fusion als auch eine mögliche CVR-Auszahlung beeinflussen können.
Positive
- Special dividend of CVRs gives shareholders potential upside from future monetisation of legacy assets without additional investment.
- Asset-specific payout structure aligns management and investors by segregating pre-merger value from the new combined entity.
Negative
- CVR payments are not guaranteed; holders receive nothing if asset sales or milestones do not materialise.
- Merger closing risk and numerous contingencies could delay or nullify both the transaction and any CVR value.
Insights
TL;DR: CVR dividend offers upside but value highly uncertain until asset sales close.
The CVR distribution transfers potential future proceeds from IKNA’s legacy oncology programs to shareholders as the company pivots via the Inmagene merger. Payout mechanics—100% of pre-merger asset proceeds and 90% of certain post-merger proceeds—could unlock non-dilutive cash, yet no minimum is guaranteed. Strategically, the CVR cleans IKNA’s balance sheet for the combined entity and aligns investors by ring-fencing legacy economics. Because proceeds depend on third-party milestones and deal closings, timing and magnitude remain speculative. Overall market impact is neutral: shareholders gain a free option, but intrinsic value is unquantified and contingent on an as-yet unconsummated merger.
TL;DR: CVRs mitigate value leakage risk but underline significant closing uncertainties.
The two-step Cayman merger structure requires multiple regulatory and procedural approvals; any delay nullifies near-term synergy capture. Issuing CVRs now can placate shareholders concerned about divesting non-core oncology assets during the merger. However, the filing explicitly itemises eight separate risk factors—closing conditions, litigation, cost overrun, asset-sale failures—highlighting the fragile path to any eventual payout. From a transaction-risk standpoint, the disclosure is balanced yet signals that investors should discount CVR value heavily until milestones mature.
Ikena Oncology (IKNA) ha presentato un modulo 8-K annunciando che il suo consiglio di amministrazione ha dichiarato un dividendo speciale una tantum consistente in un diritto di valore contingente (CVR) per ogni azione in circolazione detenuta alla chiusura delle attività del 24 luglio 2025. I CVR vengono emessi in relazione alla fusione in due fasi precedentemente comunicata con Inmagene Biopharmaceuticals.
Secondo l'accordo previsto sui CVR, i detentori riceveranno (i) il 100% dei proventi netti, se presenti, derivanti da milestone, royalty o pagamenti legati alla cessione degli asset di IKNA antecedenti alla fusione e (ii) il 90% dei proventi netti da cessioni effettuate entro un anno dalla chiusura, entrambi dopo le deduzioni consentite (tasse, spese, contenziosi e costi di chiusura). Se non dovessero emergere proventi durante il periodo di validità dei CVR, questi scadranno senza valore.
La struttura della fusione rimane invariata: Merger Sub I si fonde con Inmagene, seguita immediatamente dalla fusione di Inmagene in Merger Sub II, creando una controllata interamente posseduta da IKNA. Le dichiarazioni previsionali avvertono che condizioni di chiusura, controllo delle spese, procedimenti legali e milestone di vendita degli asset potrebbero influenzare sia la fusione sia qualsiasi pagamento derivante dai CVR.
Ikena Oncology (IKNA) presentó un formulario 8-K anunciando que su junta directiva ha declarado un dividendo especial único de un derecho de valor contingente (CVR) por cada acción en circulación que se posea al cierre de operaciones el 24 de julio de 2025. Los CVR se emiten en relación con la fusión en dos etapas previamente divulgada con Inmagene Biopharmaceuticals.
Bajo el acuerdo previsto del CVR, los titulares recibirán (i) el 100% de los ingresos netos, si los hubiera, provenientes de hitos, regalías o pagos condicionados vinculados a la disposición de los activos previos a la fusión de IKNA y (ii) el 90% de los ingresos netos de las disposiciones realizadas dentro del año siguiente al cierre, ambos después de deducciones permitidas (impuestos, gastos, litigios y costos de liquidación). Si no se generan ingresos durante el periodo del CVR, estos expirarán sin valor.
La estructura de la fusión permanece sin cambios: Merger Sub I se fusiona con Inmagene, seguido inmediatamente por la fusión de Inmagene en Merger Sub II, creando una subsidiaria de propiedad total de IKNA. Las declaraciones prospectivas advierten que las condiciones de cierre, control de gastos, procedimientos legales y hitos de venta de activos pueden afectar tanto la fusión como cualquier pago de CVR.
Ikena Oncology (IKNA)는 8-K 보고서를 제출하여 이사회가 2025년 7월 24일 영업 종료 시점 기준으로 보유한 모든 주식에 대해 1회성 특별 배당으로 1개의 조건부 가치 권리(CVR)를 선언했다고 발표했습니다. CVR은 이전에 공개된 Inmagene Biopharmaceuticals와의 2단계 합병과 관련하여 발행됩니다.
예정된 CVR 계약에 따라 보유자는 (i) 합병 전 IKNA 자산 처분과 관련된 마일스톤, 로열티 또는 수익 연동 지급금에서 발생하는 순수익 100%를, (ii) 종료 후 1년 이내에 실행된 처분에서 발생하는 순수익 90%를 각각 허용된 공제(세금, 비용, 소송 및 청산 비용) 후에 받게 됩니다. CVR 기간 동안 수익이 발생하지 않으면 CVR은 무가치하게 만료됩니다.
합병 구조는 변경되지 않았습니다: Merger Sub I이 Inmagene에 합병된 후 즉시 Inmagene가 Merger Sub II에 합병되어 IKNA의 완전 자회사로 설립됩니다. 미래 예측 진술은 종결 조건, 비용 통제, 법적 절차 및 자산 매각 마일스톤이 합병 및 CVR 지급에 영향을 미칠 수 있음을 경고합니다.
Ikena Oncology (IKNA) a déposé un formulaire 8-K annonçant que son conseil d'administration a déclaré un dividende spécial unique consistant en un droit à valeur conditionnelle (CVR) pour chaque action en circulation détenue à la clôture des opérations le 24 juillet 2025. Les CVR sont émis dans le cadre de la fusion en deux étapes précédemment divulguée avec Inmagene Biopharmaceuticals.
Conformément à l'accord CVR envisagé, les détenteurs recevront (i) 100 % des produits nets, le cas échéant, provenant des paiements liés à des jalons, redevances ou paiements différés liés à la cession des actifs d'IKNA antérieurs à la fusion, et (ii) 90 % des produits nets des cessions effectuées dans l'année suivant la clôture, les deux après déductions autorisées (impôts, frais, litiges et coûts de liquidation). Si aucun produit n'est généré pendant la durée des CVR, ceux-ci expireront sans valeur.
La structure de la fusion reste inchangée : Merger Sub I fusionne avec Inmagene, suivi immédiatement par la fusion d'Inmagene dans Merger Sub II, créant une filiale en propriété exclusive d'IKNA. Les déclarations prospectives avertissent que les conditions de clôture, le contrôle des dépenses, les procédures judiciaires et les jalons de vente d'actifs peuvent affecter à la fois la fusion et tout paiement lié aux CVR.
Ikena Oncology (IKNA) hat eine 8-K Meldung eingereicht, in der der Vorstand eine einmalige Sonderdividende in Form von einem bedingten Wertrecht (CVR) für jede ausstehende Aktie bekannt gibt, die zum Geschäftsschluss am 24. Juli 2025 gehalten wird. Die CVRs werden im Zusammenhang mit der zuvor bekanntgegebenen zweistufigen Fusion mit Inmagene Biopharmaceuticals ausgegeben.
Gemäß der vorgesehenen CVR-Vereinbarung erhalten die Inhaber (i) 100 % der Nettoprozesse, falls vorhanden, aus Meilenstein-, Lizenz- oder Earn-out-Zahlungen im Zusammenhang mit Veräußerungen von IKNAs vor der Fusion liegenden Vermögenswerten und (ii) 90 % der Nettoprozesse aus Veräußerungen, die innerhalb eines Jahres nach Abschluss erfolgen, jeweils nach zulässigen Abzügen (Steuern, Ausgaben, Rechtsstreitigkeiten und Abwicklungskosten). Sollten während der Laufzeit der CVRs keine Erlöse erzielt werden, verfallen diese wertlos.
Die Fusionsstruktur bleibt unverändert: Merger Sub I fusioniert mit Inmagene, unmittelbar gefolgt von der Fusion von Inmagene mit Merger Sub II, wodurch eine hundertprozentige Tochtergesellschaft von IKNA entsteht. Zukunftsgerichtete Aussagen weisen darauf hin, dass Abschlussbedingungen, Kostenkontrolle, Rechtsstreitigkeiten und Meilensteine bei Asset-Verkäufen sowohl die Fusion als auch eine mögliche CVR-Auszahlung beeinflussen können.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 29, 2025
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from ______ to ______
Commission file number: 1-11437
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(301 ) 897-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There were 233,465,056 shares of our common stock, $1 par value per share, outstanding as of July 17, 2025.
Table of Contents
Lockheed Martin Corporation
Form 10-Q
For the Quarterly Period Ended June 29, 2025
Table of Contents
| Page | |||||||||||
PART I. FINANCIAL INFORMATION | |||||||||||
| ITEM 1. | Financial Statements (Unaudited) | ||||||||||
Consolidated Statements of Earnings for the Quarters and Six Months Ended June 29, 2025 and June 30, 2024 | 3 | ||||||||||
Consolidated Statements of Comprehensive Income for the Quarters and Six Months Ended June 29, 2025 and June 30, 2024 | 4 | ||||||||||
Consolidated Balance Sheets as of June 29, 2025 and December 31, 2024 | 5 | ||||||||||
Consolidated Statements of Cash Flows for the Six Months Ended June 29, 2025 and June 30, 2024 | 6 | ||||||||||
Consolidated Statements of Equity for the Quarters Ended June 29, 2025 and June 30, 2024 | 7 | ||||||||||
Consolidated Statements of Equity for the Six Months Ended June 29, 2025 and June 30, 2024 | 8 | ||||||||||
Notes to Consolidated Financial Statements | 9 | ||||||||||
Report of Independent Registered Public Accounting Firm | 27 | ||||||||||
| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28 | |||||||||
| ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk | 44 | |||||||||
| ITEM 4. | Controls and Procedures | 44 | |||||||||
PART II. OTHER INFORMATION | |||||||||||
| ITEM 1. | Legal Proceedings | 47 | |||||||||
| ITEM 1A. | Risk Factors | 47 | |||||||||
| ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 48 | |||||||||
| ITEM 5. | Other Information | 48 | |||||||||
| ITEM 6. | Exhibits | 49 | |||||||||
SIGNATURE | 50 | ||||||||||
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Lockheed Martin Corporation
Consolidated Statements of Earnings
(unaudited; in millions, except per share data)
| Quarters Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Sales | ||||||||||||||||||||||||||||||||||||||
| Products | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Services | ||||||||||||||||||||||||||||||||||||||
| Total sales | ||||||||||||||||||||||||||||||||||||||
| Operating costs and expenses | ||||||||||||||||||||||||||||||||||||||
| Products | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Services | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Impairment and other charges | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Other unallocated, net | ||||||||||||||||||||||||||||||||||||||
| Total operating costs and expenses | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Gross profit | ||||||||||||||||||||||||||||||||||||||
| Other income, net | ||||||||||||||||||||||||||||||||||||||
| Operating profit | ||||||||||||||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Non-service FAS pension (expense) income | ( | ( | ||||||||||||||||||||||||||||||||||||
| Other non-operating income, net | ||||||||||||||||||||||||||||||||||||||
| Earnings before income taxes | ||||||||||||||||||||||||||||||||||||||
| Income tax expense | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Net earnings | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Earnings per common share | ||||||||||||||||||||||||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Cash dividends paid per common share | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Lockheed Martin Corporation
Consolidated Statements of Comprehensive Income
(unaudited; in millions)
| Quarters Ended | Six Months Ended | |||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | |||||||||||||||||||||||
| Net earnings | $ | $ | $ | $ | ||||||||||||||||||||||
| Other comprehensive income, net of tax | ||||||||||||||||||||||||||
| Postretirement benefit plans | ||||||||||||||||||||||||||
Amortization, net, net of tax of $ | ||||||||||||||||||||||||||
Other, net, net of tax of $ | ( | |||||||||||||||||||||||||
| Other comprehensive income, net of tax | ||||||||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | ||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Lockheed Martin Corporation
Consolidated Balance Sheets
(in millions, except par value)
| June 29, 2025 | December 31, 2024 | |||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||||||||
| Receivables, net | ||||||||||||||||||||
| Contract assets | ||||||||||||||||||||
| Inventories | ||||||||||||||||||||
| Other current assets | ||||||||||||||||||||
| Total current assets | ||||||||||||||||||||
| Property, plant and equipment, net | ||||||||||||||||||||
| Goodwill | ||||||||||||||||||||
| Intangible assets, net | ||||||||||||||||||||
| Deferred income taxes | ||||||||||||||||||||
| Other noncurrent assets | ||||||||||||||||||||
| Total assets | $ | $ | ||||||||||||||||||
| Liabilities and equity | ||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||
| Accounts payable | $ | $ | ||||||||||||||||||
| Salaries, benefits and payroll taxes | ||||||||||||||||||||
| Contract liabilities | ||||||||||||||||||||
| Current maturities of long-term debt and commercial paper | ||||||||||||||||||||
| Other current liabilities | ||||||||||||||||||||
| Total current liabilities | ||||||||||||||||||||
| Long-term debt, net | ||||||||||||||||||||
| Accrued pension liabilities | ||||||||||||||||||||
| Other noncurrent liabilities | ||||||||||||||||||||
| Total liabilities | ||||||||||||||||||||
| Stockholders’ equity | ||||||||||||||||||||
Common stock, $ | ||||||||||||||||||||
| Additional paid-in capital | ||||||||||||||||||||
| Retained earnings | ||||||||||||||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||||||||||||||
| Total stockholders’ equity | ||||||||||||||||||||
| Total liabilities and equity | $ | $ | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Consolidated Statements of Cash Flows
(unaudited; in millions)
| Six Months Ended | ||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | |||||||||||||||||||
| Operating activities | ||||||||||||||||||||
| Net earnings | $ | $ | ||||||||||||||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Deferred income taxes | ( | ( | ||||||||||||||||||
| Impairment and other charges | ||||||||||||||||||||
| Program losses | ||||||||||||||||||||
| Changes in assets and liabilities | ||||||||||||||||||||
| Receivables, net | ( | ( | ||||||||||||||||||
| Contract assets | ( | ( | ||||||||||||||||||
| Inventories | ( | |||||||||||||||||||
| Accounts payable | ||||||||||||||||||||
| Contract liabilities | ( | ( | ||||||||||||||||||
| Income taxes | ||||||||||||||||||||
| Qualified defined benefit pension plans | ( | |||||||||||||||||||
| Other, net | ( | ( | ||||||||||||||||||
| Net cash provided by operating activities | ||||||||||||||||||||
| Investing activities | ||||||||||||||||||||
| Capital expenditures | ( | ( | ||||||||||||||||||
| Other, net | ( | |||||||||||||||||||
| Net cash (used for) investing activities | ( | ( | ||||||||||||||||||
| Financing activities | ||||||||||||||||||||
| Issuance of long-term debt, net of related costs | ||||||||||||||||||||
| Repayments of long-term debt | ( | ( | ||||||||||||||||||
| Proceeds from commercial paper, net | ||||||||||||||||||||
| Repurchases of common stock | ( | ( | ||||||||||||||||||
| Dividends paid | ( | ( | ||||||||||||||||||
| Other, net | ( | ( | ||||||||||||||||||
| Net cash (used for) financing activities | ( | ( | ||||||||||||||||||
| Net change in cash and cash equivalents | ( | |||||||||||||||||||
| Cash and cash equivalents at beginning of period | ||||||||||||||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Consolidated Statements of Equity
For the Quarters Ended June 29, 2025 and June 30, 2024
(unaudited; in millions)
| Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Equity | |||||||||||||||||||||||||||||||
| Balance at March 30, 2025 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Net earnings | — | — | — | ||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | ||||||||||||||||||||||||||||||||
| Dividends declared | — | — | ( | — | ( | ||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | ( | ( | — | ( | ||||||||||||||||||||||||||||||
| Stock-based awards, ESOP activity and other | — | — | — | ||||||||||||||||||||||||||||||||
| Balance at June 29, 2025 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Net earnings | — | — | — | ||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | ||||||||||||||||||||||||||||||||
| Dividends declared | — | — | ( | — | ( | ||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | ( | ( | — | ( | ||||||||||||||||||||||||||||||
| Stock-based awards, ESOP activity and other | — | — | — | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Consolidated Statements of Equity
For the Six Months Ended June 29, 2025 and June 30, 2024
(unaudited; in millions)
| Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Equity | |||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Net earnings | — | — | — | ||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | ||||||||||||||||||||||||||||||||
| Dividends declared | — | — | ( | — | ( | ||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | ( | ( | — | ( | ||||||||||||||||||||||||||||||
Stock-based awards, ESOP activity and other | — | — | |||||||||||||||||||||||||||||||||
| Balance at June 29, 2025 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Net earnings | — | — | — | ||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | ||||||||||||||||||||||||||||||||
| Dividends declared | — | — | ( | — | ( | ||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | ( | ( | — | ( | ||||||||||||||||||||||||||||||
Stock-based awards, ESOP activity and other | — | — | |||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Notes to Consolidated Financial Statements (unaudited)
NOTE 1 - BASIS OF PRESENTATION
We prepared these consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission (SEC) Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.
In the opinion of management, these consolidated financial statements reflect all adjustments that are of a normal recurring nature necessary for a fair presentation of our results of operations, financial condition, and cash flows for the interim periods presented. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates. Estimates inherent in the preparation of our consolidated financial statements include, but are not limited to, accounting for sales and cost recognition; postretirement benefit plans; environmental liabilities and assets for the portion of environmental costs that are probable of future recovery; evaluation of goodwill, intangible assets, investments and other assets for impairment; income taxes including deferred tax assets; fair value measurements; and contingencies. The consolidated financial statements include the accounts of subsidiaries we control and variable interest entities if we are the primary beneficiary. We eliminate intercompany balances and transactions in consolidation.
On June 26, 2025, we paid $360 million, in cash, to close our acquisition of Amentum’s Rapid Solutions business (Rapid Solutions). The acquisition of Rapid Solutions is expected to enhance our Space business segment′s capabilities, particularly in radar and payload technology, and support our customers′ evolving needs for domain awareness and real- time missions. The purchase price was allocated to the estimated fair value of net tangible and intangible assets acquired, with any excess purchase price recorded as goodwill. As a result, we recorded goodwill of $195 million at our Space business segment. The final determination of the fair values of certain assets and liabilities will be completed within the measurement period of up to one year from the acquisition date. Rapid Solutions operates within our Space business segment and the financial results of Rapid Solutions have been included within our operating results in the period post-acquisition.
We close our books and records on the last Sunday of each interim calendar quarter, which was on June 29 for the second quarter of 2025 and June 30 for the second quarter of 2024, to align our financial closing with our business processes. The consolidated financial statements and tables of financial information included herein are labeled based on that convention. This practice only affects interim periods; our fiscal year ends on December 31.
The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the full year or future periods. Unless otherwise noted, we present all per share amounts cited in these consolidated financial statements on a “per diluted share” basis. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024 (2024 Form 10-K).
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Notes to Consolidated Financial Statements (unaudited) (continued)
NOTE 2 - EARNINGS PER COMMON SHARE
The weighted average number of shares outstanding used to compute earnings per common share were as follows (in millions):
| Quarters Ended | Six Months Ended | ||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | ||||||||||||||||||||||||||
| Weighted average common shares outstanding for basic computations | |||||||||||||||||||||||||||||
Weighted average dilutive effect of equity awards | |||||||||||||||||||||||||||||
Weighted average common shares outstanding for diluted computations | |||||||||||||||||||||||||||||
NOTE 3 - INFORMATION ON BUSINESS SEGMENTS
Our operations are organized into four
Our chief operating decision maker (CODM) consists of the Chairman, President and Chief Executive Officer and the Chief Operating Officer. The CODM is responsible for allocating resources and assessing the performance of our consolidated enterprise and business segments. The profitability measure the CODM uses to allocate resources and assess segment performance is segment operating profit (and related margin rate, calculated as segment operating profit divided by sales), which is compared to historical and forecasted amounts on a regular basis.
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Notes to Consolidated Financial Statements (unaudited) (continued)
Summary operating results for each of our business segments were as follows (in millions):
| Quarters Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | ||||||||||||||||||||||||||||||||
| Sales | |||||||||||||||||||||||||||||||||||
| Aeronautics | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Missiles and Fire Control | |||||||||||||||||||||||||||||||||||
| Rotary and Mission Systems | |||||||||||||||||||||||||||||||||||
| Space | |||||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Operating costs and expenses | |||||||||||||||||||||||||||||||||||
| Aeronautics | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Missiles and Fire Control | |||||||||||||||||||||||||||||||||||
| Rotary and Mission Systems | |||||||||||||||||||||||||||||||||||
| Space | |||||||||||||||||||||||||||||||||||
| Total operating costs and expenses | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
Operating profit (loss) (a) | |||||||||||||||||||||||||||||||||||
| Aeronautics | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||
| Missiles and Fire Control | |||||||||||||||||||||||||||||||||||
| Rotary and Mission Systems | ( | ||||||||||||||||||||||||||||||||||
| Space | |||||||||||||||||||||||||||||||||||
| Total business segment operating profit | |||||||||||||||||||||||||||||||||||
| Unallocated items | |||||||||||||||||||||||||||||||||||
| FAS/CAS pension operating adjustment | |||||||||||||||||||||||||||||||||||
Impairment and other charges | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Intangible asset amortization expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
Other, net | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Total unallocated items | |||||||||||||||||||||||||||||||||||
| Total consolidated operating profit | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Intersegment sales | |||||||||||||||||||||||||||||||||||
| Aeronautics | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Missiles and Fire Control | |||||||||||||||||||||||||||||||||||
| Rotary and Mission Systems | |||||||||||||||||||||||||||||||||||
| Space | |||||||||||||||||||||||||||||||||||
| Total intersegment sales | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
(a)Operating profit by segment includes certain immaterial items, such as other income (primarily equity earnings) that are not presented separately in the table. Accordingly, the difference between sales less operating costs and expenses may not equal operating profit by segment.
Segment results exclude intersegment transactions as these activities are eliminated in consolidation and are not considered in assessing the performance of each segment. As described below, segment operating profit also excludes other transactions that are not part of management’s evaluation of segment operating performance, which are included in “Unallocated items” to reconcile total segment operating profit to consolidated amounts. Business segment operating profit includes our share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of our business segments.
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Notes to Consolidated Financial Statements (unaudited) (continued)
Unallocated Items
Business segment operating profit excludes the FAS/CAS pension operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government Cost Accounting Standards (CAS) or Federal Acquisition Regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, retiree benefits, significant severance charges, significant asset impairments, gains or losses from divestitures, intangible asset amortization expense, and other miscellaneous corporate activities. Collectively these items are included in “Unallocated items” to reconcile total segment to consolidated operating profit. See “Note 10 - Other” for a discussion related to certain factors that may impact the comparability of sales and operating profit of our business segments.
FAS/CAS Pension Operating Adjustment
Our business segment results of operations include pension expense as calculated under CAS, which we refer to as CAS pension cost. We recover CAS pension and other postretirement benefit plan cost through the pricing of our products and services on U.S. Government contracts and, therefore, recognize CAS pension cost in each business segments’ sales and operating costs and expenses. Our consolidated financial statements must present pension and other postretirement benefit plan (expense) income calculated in accordance with Financial Accounting Standards (FAS) requirements under U.S. GAAP. The FAS/CAS pension operating adjustment represents the difference between CAS pension cost included in segment operating income and the service cost component of FAS pension (expense) income included in consolidated operating profit. To the extent that CAS pension cost exceeds the service cost component of FAS pension (expense) income we have a favorable FAS/CAS pension operating adjustment. The non-service FAS pension (expense) income components are included in non-service FAS pension (expense) income on our consolidated statements of earnings.
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Notes to Consolidated Financial Statements (unaudited) (continued)
Disaggregation of Sales
Sales by products and services, contract type, customer, and geographic region were as follows (in millions):
Quarter Ended June 29, 2025 | ||||||||||||||||||||||||||||||||
| Aeronautics | MFC | RMS | Space | Total | ||||||||||||||||||||||||||||
| Sales | ||||||||||||||||||||||||||||||||
| Products | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Services | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Sales by contract type | ||||||||||||||||||||||||||||||||
| Fixed-price | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Cost-reimbursable | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Sales by customer | ||||||||||||||||||||||||||||||||
| U.S. Government | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
International (a) | ||||||||||||||||||||||||||||||||
| U.S. commercial and other | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Sales by geographic region | ||||||||||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Europe | ||||||||||||||||||||||||||||||||
| Asia Pacific | ||||||||||||||||||||||||||||||||
| Middle East | ||||||||||||||||||||||||||||||||
| Other | ( | |||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Six Months Ended June 29, 2025 | ||||||||||||||||||||||||||||||||
| Aeronautics | MFC | RMS | Space | Total | ||||||||||||||||||||||||||||
| Sales | ||||||||||||||||||||||||||||||||
| Products | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Services | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Sales by contract type | ||||||||||||||||||||||||||||||||
| Fixed-price | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Cost-reimbursable | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Sales by customer | ||||||||||||||||||||||||||||||||
| U.S. Government | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
International (a) | ||||||||||||||||||||||||||||||||
| U.S. commercial and other | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Sales by geographic region | ||||||||||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Europe | ||||||||||||||||||||||||||||||||
| Asia Pacific | ||||||||||||||||||||||||||||||||
| Middle East | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
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Notes to Consolidated Financial Statements (unaudited) (continued)
Quarter Ended June 30, 2024 | ||||||||||||||||||||||||||||||||
| Aeronautics | MFC | RMS | Space | Total | ||||||||||||||||||||||||||||
| Sales | ||||||||||||||||||||||||||||||||
| Products | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Services | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Sales by contract type | ||||||||||||||||||||||||||||||||
| Fixed-price | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Cost-reimbursable | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Sales by customer | ||||||||||||||||||||||||||||||||
| U.S. Government | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
International (a) | ||||||||||||||||||||||||||||||||
| U.S. commercial and other | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Sales by geographic region | ||||||||||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Europe | ||||||||||||||||||||||||||||||||
| Asia Pacific | ||||||||||||||||||||||||||||||||
| Middle East | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Six Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||
| Aeronautics | MFC | RMS | Space | Total | ||||||||||||||||||||||||||||
| Sales | ||||||||||||||||||||||||||||||||
| Products | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Services | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Sales by contract type | ||||||||||||||||||||||||||||||||
| Fixed-price | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Cost-reimbursable | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Sales by customer | ||||||||||||||||||||||||||||||||
| U.S. Government | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
International (a) | ||||||||||||||||||||||||||||||||
| U.S. commercial and other | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Sales by geographic region | ||||||||||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Europe | ||||||||||||||||||||||||||||||||
| Asia Pacific | ||||||||||||||||||||||||||||||||
| Middle East | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Total sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
(a)International sales include foreign military sales (FMS) contracted through the U.S. Government and direct commercial sales to international governments and other international customers.
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Notes to Consolidated Financial Statements (unaudited) (continued)
Our Aeronautics business segment includes our largest program, the F-35 Lightning II, an international multi-role, multi-variant, stealth fighter aircraft. Sales for the F-35 program represented approximately 28 % and 27 % of our total consolidated sales for the quarter and six months ended June 29, 2025 and 26 % and 25 % of our total consolidated sales for the quarter and six months ended June 30, 2024.
Assets
Total assets for each of our business segments were as follows (in millions):
| June 29, 2025 | December 31, 2024 | |||||||||||||||||||
| Assets | ||||||||||||||||||||
| Aeronautics | $ | $ | ||||||||||||||||||
| Missiles and Fire Control | ||||||||||||||||||||
| Rotary and Mission Systems | ||||||||||||||||||||
| Space | ||||||||||||||||||||
| Total business segment assets | ||||||||||||||||||||
Corporate assets (a) | ||||||||||||||||||||
| Total assets | $ | $ | ||||||||||||||||||
(a)Corporate assets primarily include cash and cash equivalents, deferred income taxes, assets for the portion of environmental costs that are probable of future recovery, property, plant and equipment used in our corporate operations, assets held in a trust for deferred compensation plans, and other marketable investments.
NOTE 4 - CONTRACT ASSETS AND LIABILITIES
Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. Contract liabilities include advance payments and billings in excess of revenue recognized. Contract assets and contract liabilities were as follows (in millions):
| June 29, 2025 | December 31, 2024 | |||||||||||||||||||
| Contract assets | $ | $ | ||||||||||||||||||
| Contract liabilities | ||||||||||||||||||||
Contract assets are primarily driven by the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations for which we have not yet billed our customers. During the six months ended June 29, 2025, contract assets increased $1.9 billion primarily due to the F-35 program at Aeronautics. There were no
Contract liabilities increased $66 million during the six months ended June 29, 2025, primarily due to payments received in excess of revenue recognized on performance obligations. During the quarter and six months ended June 29, 2025, we recognized $1.3 billion and $4.5 billion of our contract liabilities at December 31, 2024 as revenue. During the quarter and six months ended June 30, 2024, we recognized $1.7 billion and $4.1 billion of our contract liabilities at December 31, 2023 as revenue.
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Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
NOTE 5 - INVENTORIES
Inventories consisted of the following (in millions):
| June 29, 2025 | December 31, 2024 | |||||||||||||||||||
| Materials, spares and supplies | $ | $ | ||||||||||||||||||
| Work-in-process | ||||||||||||||||||||
| Finished goods | ||||||||||||||||||||
| Total inventories | $ | $ | ||||||||||||||||||
Costs incurred to fulfill a contract in advance of the contract being awarded are included in inventories as work-in-process if we determine that those costs relate directly to a contract or to an anticipated contract that we can specifically identify and determine that the contract award is probable, the costs generate or enhance resources that will be used in satisfying performance obligations, and the costs are recoverable (referred to as pre-contract costs). These advance procurement costs are generally incurred in order to enhance our ability to achieve schedule and certain customer milestones. Pre-contract costs that are initially capitalized in inventory are eventually generally recognized as operating costs consistent with the transfer of products and services to the customer upon the receipt of the anticipated contract. All other pre-contract costs, including start-up costs, are expensed as incurred. As of both June 29, 2025 and December 31, 2024, $1.5
NOTE 6 - POSTRETIREMENT BENEFIT PLANS
The pretax FAS (expense) income related to our qualified defined benefit pension plans consisted of the following (in millions):
| Quarters Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | ||||||||||||||||||||||||||||||||
| Qualified defined benefit pension plans | |||||||||||||||||||||||||||||||||||
| Operating: | |||||||||||||||||||||||||||||||||||
| Service cost | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||
| Non-operating: | |||||||||||||||||||||||||||||||||||
| Interest cost | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Expected return on plan assets | |||||||||||||||||||||||||||||||||||
| Amortization of actuarial losses | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Amortization of prior service (costs) credits | ( | ( | |||||||||||||||||||||||||||||||||
| Non-service FAS pension (expense) income | ( | ( | |||||||||||||||||||||||||||||||||
| Total FAS pension (expense) income | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||
We record the service cost component of FAS (expense) income for our qualified defined benefit pension plans in consolidated operating profit and the non-service components in non-service FAS pension (expense) income on our consolidated statements of earnings.
Total FAS income for our other postretirement benefit plans was not material during the quarters and six months ended June 29, 2025 and June 30, 2024 and is part of other non-operating income, net on our consolidated statements of earnings.
The required funding of our qualified defined benefit pension plans is determined in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), as amended, along with consideration of CAS and Internal Revenue Code rules. We made no
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Notes to Consolidated Financial Statements (unaudited) (continued)
NOTE 7 - LEGAL PROCEEDINGS AND CONTINGENCIES
Legal Proceedings
We are a party to litigation and other proceedings that arise in the ordinary course of our business, including matters arising under provisions relating to the protection of the environment, and are subject to contingencies related to certain businesses we previously owned. These types of matters could result in fines, penalties, cost reimbursements or contributions, compensatory or treble damages or non-monetary sanctions or relief. We believe the probability is remote that the outcome of each of these matters, including the legal proceedings described below, will have a material adverse effect on the company as a whole, notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings and cash flows in the period in which it is recognized. Among the factors that we consider in this assessment are the nature of existing legal proceedings and claims, the asserted or possible damages or loss contingency (if estimable), the progress of the case, existing law and precedent, the opinions or views of legal counsel and other advisers, our experience in similar cases and the experience of other companies, the facts available to us at the time of assessment and how we intend to respond to the proceeding or claim. Our assessment of these factors may change over time as individual proceedings or claims progress.
Although we cannot predict the outcome of legal or other proceedings with certainty, where there is at least a reasonable possibility that a loss may be incurred, GAAP requires us to disclose an estimate of the reasonably possible loss or range of loss or make a statement that such an estimate cannot be made. We follow a thorough process in which we seek to estimate the reasonably possible loss or range of loss, and only if we are unable to make such an estimate do we conclude and disclose that an estimate cannot be made. Accordingly, unless otherwise indicated below in our discussion of legal proceedings, a reasonably possible loss or range of loss associated with any individual legal proceeding cannot be estimated.
Lockheed Martin v. Metropolitan Transportation Authority
On April 24, 2009, we filed a declaratory judgment action against the New York Metropolitan Transportation Authority and its Capital Construction Company (collectively, the MTA) asking the U.S. District Court for the Southern District of New York to find that the MTA is in material breach of our agreement based on the MTA’s failure to provide access to sites where work must be performed and the customer-furnished equipment necessary to complete the contract. The MTA filed an answer and counterclaim alleging that we breached the contract and subsequently terminated the contract for alleged default. The primary damages sought by the MTA are the costs to complete the contract and potential re-procurement costs. While we are unable to estimate the cost of another contractor to complete the contract and the costs of re-procurement, we note that our contract with the MTA had a total value of $323 million, of which $241 million was paid to us, and that the MTA is seeking damages of approximately $190 million. We dispute the MTA’s allegations and are defending against them. Additionally, following an investigation, our sureties on a performance bond related to this matter, who were represented by independent counsel, concluded that the MTA’s termination of the contract was improper. Finally, our declaratory judgment action was later amended to include claims for monetary damages against the MTA of approximately $95 million. This matter was taken under submission by the District Court in December 2014, after a five-week bench trial and the filing of post-trial pleadings by the parties. We continue to await a decision from the District Court. Although this matter relates to our former Information Systems & Global Solutions business (IS&GS), we retained responsibility for the litigation when we divested IS&GS in 2016.
Environmental Matters
We are involved in proceedings and potential proceedings relating to soil, sediment, surface water, and groundwater contamination, disposal of hazardous substances, and other environmental matters at several of our current or former facilities, other facilities for which we may have contractual responsibility, and at third-party sites where we have been designated as a potentially responsible party (PRP). These proceedings could result in fines, penalties, cost reimbursements or contributions, compensatory or treble damages or non-monetary sanctions or relief.
Based on our estimates, at June 29, 2025 and December 31, 2024, the aggregate amount of liabilities recorded relative to environmental remediation matters was $669 million and $677 million, respectively, most of which are recorded in other noncurrent liabilities on our consolidated balance sheets. We have recorded assets for the portion of environmental costs that are probable of future recovery totaling $611 million and $619 million at June 29, 2025 and
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Notes to Consolidated Financial Statements (unaudited) (continued)
December 31, 2024, respectively, most of which are recorded in other noncurrent assets on our consolidated balance sheets.
We are monitoring or investigating a number of former and presently operating facilities for potential future remediation. We perform quarterly reviews of the status of our environmental remediation sites and the related liabilities and receivables. Additionally, in our quarterly reviews, we consider various factors in estimating the timing and amount of any future costs that may be required for remediation activities, as we cannot reasonably determine the extent of our financial exposure in all cases. We project costs and recovery of costs over approximately 20 years.
We also pursue claims for recovery of costs incurred or for contribution to site remediation costs against other PRPs, including the U.S. Government, and are conducting remediation activities under various consent decrees, orders, and agreements relating to soil, groundwater, sediment, or surface water contamination at certain sites of former or current operations. Under agreements related to certain sites in California, New York, United States Virgin Islands and Washington, the U.S. Government and/or a private party reimburses us an amount equal to a percentage, specific to each site, of expenditures for certain remediation activities in their capacity as PRPs under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).
In addition to the proceedings and potential proceedings discussed above, potential new regulations concerning perchlorate and hexavalent chromium at the federal and state level could increase our cleanup costs. If regulations require substantially more stringent clean-up levels of perchlorate or hexavalent chromium, we expect a material increase in both our estimates for environmental liabilities and the related assets for the portion of costs that are probable of future recovery. The amount that would be allocable to our non-U.S. Government contracts or that is determined not to be recoverable under U.S. Government contracts would be expensed, which may have a material effect on our earnings in any particular reporting period.
We also are evaluating the potential impact of new, existing, and contemplated requirements addressing a class of chemicals known generally as per- and polyfluoroalkyl substances (PFAS). PFAS are common and appear in products such as fire-fighting foams and stain- and stick-resistant products (e.g., Teflon, stain-resistant fabrics) and have been used in manufacturing processes. Regulations requiring very low PFAS contaminant levels in drinking water could eventually lead to increased cleanup costs at a number of our environmental remediation sites.
Letters of Credit, Surety Bonds and Third-Party Guarantees
We have entered into standby letters of credit and surety bonds issued on our behalf by financial institutions, and we have directly issued guarantees to third parties primarily relating to advances received from customers and the guarantee of future performance on certain contracts. Letters of credit and surety bonds generally are available for draw down in the event we do not perform. We had total outstanding letters of credit and surety bonds aggregating $2.6 billion and $2.7 billion at June 29, 2025 and December 31, 2024.
Additionally, we may guarantee the contractual performance of third parties such as joint venture partners. At June 29, 2025 and December 31, 2024, third-party guarantees totaled $105 million and $351 million, of which approximately 83 % and 30 % related to guarantees of contractual performance of joint ventures to which we currently are or previously were a party. These amounts represent our estimate of the maximum amounts we would expect to incur upon the contractual non-performance of the joint venture, joint venture partners or divested businesses. Generally, we also have cross-indemnities in place that may enable us to recover amounts that may be paid on behalf of a joint venture partner. Third-party guarantees do not include guarantees issued on behalf of subsidiaries and other consolidated entities.
In determining our exposures, we evaluate the reputation, performance on contractual obligations, technical capabilities and credit quality of our current and former joint venture partners and the transferee under novation agreements all of which include a guarantee as required by the FAR. At June 29, 2025 and December 31, 2024, there were no material amounts recorded in our financial statements related to third-party guarantees or novation agreements.
Other Contingencies
As a U.S. Government contractor, we are subject to various audits and investigations by the U.S. Government to determine whether our operations are being conducted in accordance with applicable regulatory requirements. U.S. Government investigations of us, whether relating to U.S. Government contracts or conducted for other reasons, could result in civil or criminal penalties and administrative sanctions, including reductions of the value of contracts, contract
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Notes to Consolidated Financial Statements (unaudited) (continued)
modifications or terminations, forfeiture of profits, suspension of payments, repayments, fines or penalties being imposed upon us, suspension, proposed debarment, debarment from eligibility for future U.S. Government contracting, or suspension of export privileges. Reductions of the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, repayments, fines and penalties could have a material impact on financial condition and results of operations in any particular reporting period, and suspension or debarment could have a material adverse effect on us because of our dependence on contracts with the U.S. Government. U.S. Government investigations often take years to complete and many result in no adverse action against us. We also provide products and services to customers outside of the United States, which are subject to U.S. and foreign laws and regulations and foreign procurement policies and practices. Our compliance with local regulations or applicable U.S. Government regulations also may be audited or investigated.
Additionally, in the normal course of business, we provide warranties to our customers associated with certain product sales. We record estimated warranty costs in the period in which the related products are delivered. The warranty liability is generally based on the number of months of warranty coverage remaining for the products delivered and the average historical monthly warranty payments. Warranty obligations incurred in connection with long-term production contracts are accounted for within the contract estimates at completion.
NOTE 8 - FAIR VALUE MEASUREMENTS
Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following (in millions):
| June 29, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Total | Level 1 | Level 2 | |||||||||||||||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Mutual funds | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| U.S. Government securities | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other securities | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives | ||||||||||||||||||||||||||||||||||||||||||||||||||
Substantially all assets measured at fair value, other than derivatives, represent assets held in a trust to fund certain of our non-qualified deferred compensation plans and are recorded in other noncurrent assets on our consolidated balance sheets. The fair values of mutual funds and certain other securities are determined by reference to the quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction costs. The fair values of U.S. Government and certain other securities are determined using pricing models that use observable inputs (e.g., interest rates and yield curves observable at commonly quoted intervals), bids provided by brokers or dealers or quoted prices of securities with similar characteristics. The fair values of derivative instruments, which consist of foreign currency forward contracts, including embedded derivatives, and interest rate swap contracts, are primarily determined based on the present value of future cash flows using model-derived valuations that use observable inputs such as interest rates, credit spreads and foreign currency exchange rates.
We also make investments in companies that we believe are advancing or developing new technologies applicable to our business. These investments are primarily in early-stage companies and may be in the form of common or preferred stock, warrants, convertible debt securities, investments in funds or equity method investments. All of these investments are in securities without readily determinable fair values (privately held securities), which are measured initially at cost and are then adjusted to fair value only if there is an observable price change or reduced for impairment, if applicable. The carrying amounts of the investments were $601 million and $600 million at June 29, 2025 and December 31, 2024. Due to adjustments in valuation and/or sales of investments, we recorded net gains of $19 million ($14 million, or $0.06 per share, after tax) and $20 million ($15 million, or $0.06 per share, after tax) during the quarter and six months ended June 29, 2025. We recorded net gains of $9 million ($7 million, or $0.03 per share, after-tax) and $14 million ($11 million, or $0.04 per share, after-tax) during the quarter and six months ended June 30, 2024.
We use derivative instruments principally to reduce our exposure to market risks from changes in foreign currency exchange rates and interest rates. We transact business globally and are subject to risks associated with changing foreign currency exchange rates. We do not enter into or hold derivative instruments for speculative trading purposes. These
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Notes to Consolidated Financial Statements (unaudited) (continued)
contracts hedge forecasted foreign currency transactions in order to minimize fluctuations in our earnings and cash flows associated with changes in foreign currency exchange rates. We designate foreign currency hedges as cash flow hedges. We enter into foreign currency hedges such as forward and option contracts that change in value as foreign currency exchange rates change. Our most significant foreign currency exposures relate to the British pound sterling, the euro, the Canadian dollar, the Australian dollar, the Norwegian kroner and the Polish zloty. We also are exposed to the impact of interest rate changes primarily through our borrowing activities. For fixed rate borrowings, we may use variable interest rate swaps, effectively converting fixed rate borrowings to variable rate borrowings in order to hedge changes in the fair value of the debt. These swaps are designated as fair value hedges. For variable rate borrowings, we may use fixed interest rate swaps, effectively converting variable rate borrowings to fixed rate borrowings in order to minimize the impact of interest rate changes on earnings. These swaps are designated as cash flow hedges. We also may enter into derivative instruments that are not designated as hedges and do not qualify for hedge accounting, which are intended to minimize certain economic exposures.
The aggregate notional amount of our outstanding interest rate swaps was $1.3 7.9 billion and $7.5 billion at June 29, 2025 and December 31, 2024. The fair values of our outstanding interest rate swaps and foreign currency hedges at June 29, 2025 and December 31, 2024 were not significant. Derivative instruments did not have a material impact on net earnings and comprehensive income during the quarters and six months ended June 29, 2025 and June 30, 2024. The impact of derivative instruments on our consolidated statements of cash flows is included in net cash provided by operating activities. Substantially all of our derivatives are designated for hedge accounting.
In addition to the financial instruments listed in the table above, we hold other financial instruments, including cash and cash equivalents, receivables, accounts payable, commercial paper and debt. The carrying amounts for cash and cash equivalents, receivables and accounts payable approximated their fair values. The estimated fair value of our outstanding debt and commercial paper was $21.6 billion and $20.2 billion at June 29, 2025 and December 31, 2024. The outstanding principal amount of debt and commercial paper, including short-term and long-term debt, was $22.9 billion and $21.6 billion at June 29, 2025 and December 31, 2024, excluding $1.2 billion and $1.3 billion of unamortized discounts and issuance costs at June 29, 2025 and December 31, 2024. The estimated fair values of our outstanding debt were determined based on the present value of future cash flows using model-derived valuations that use observable inputs such as interest rates and credit spreads (Level 2).
NOTE 9 - STOCKHOLDERS’ EQUITY
Repurchases of Common Stock
During the six months ended June 29, 2025, we repurchased 2.7 million shares of our common stock in open market purchases for $1.3 billion. The total remaining authorization for future common stock repurchases under our share repurchase program was $8.1 billion as of June 29, 2025. As we repurchase our common shares, we reduce common stock for the $1 of par value of the shares repurchased, with the excess purchase price over par value recorded as a reduction of additional paid-in capital. If additional paid-in capital is reduced to zero, we record the remainder of the excess purchase price over par value as a reduction of retained earnings.
Dividends
We paid cash dividends of $1.6 billion ($6.60 per share) during the six months ended June 29, 2025. Additionally, we declared a third quarter 2025 dividend totaling approximately $770 million ($3.30 per share), which will be paid in September 2025. The total amount of dividends declared may differ from the total amount of dividends paid during a period due to the timing of dividend-equivalents paid on RSUs and PSUs. These dividend-equivalents are accrued during the vesting period and are paid upon the vesting of the RSUs and PSUs, which primarily occurs in the first quarter each year.
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Notes to Consolidated Financial Statements (unaudited) (continued)
Accumulated Other Comprehensive Loss
Changes in the balance of AOCL, net of tax, consisted of the following (in millions):
| Postretirement Benefit Plans | Other, net | AOCL | ||||||||||||||||||
| Balance at December 31, 2024 | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Other comprehensive income before reclassifications | ||||||||||||||||||||
| Amounts reclassified from AOCL | ||||||||||||||||||||
Amortization of net actuarial losses (a) | — | |||||||||||||||||||
Amortization of net prior service costs (a) | — | |||||||||||||||||||
| Other | — | |||||||||||||||||||
| Total reclassified from AOCL | ||||||||||||||||||||
| Total other comprehensive income | ||||||||||||||||||||
| Balance at June 29, 2025 | $ | ( | $ | $ | ( | |||||||||||||||
| Balance at December 31, 2023 | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Other comprehensive (loss) before reclassifications | ( | ( | ||||||||||||||||||
| Amounts reclassified from AOCL | ||||||||||||||||||||
Amortization of net actuarial losses (a) | — | |||||||||||||||||||
Amortization of net prior service credits (a) | ( | — | ( | |||||||||||||||||
| Other | — | |||||||||||||||||||
| Total reclassified from AOCL | ||||||||||||||||||||
| Total other comprehensive income (loss) | ( | |||||||||||||||||||
| Balance at June 30, 2024 | $ | ( | $ | ( | $ | ( | ||||||||||||||
(a)Reclassifications from AOCL related to postretirement benefit plans were recorded as a component of FAS (expense) income for each period presented. These amounts include $64 million and $19 million, net of tax, for the quarters ended June 29, 2025 and June 30, 2024, which are comprised of the amortization of net actuarial losses of $55 million and $47 million, and the amortization of net prior service costs (credits) of $9 million and $(28 ) million, for the quarters ended June 29, 2025 and June 30, 2024. See “Note 6 - Postretirement Benefit Plans”.
NOTE 10 - OTHER
Contract Estimates
We generate sales from long-term contracts for the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. Substantially all of our sales are recognized over time using the percentage-of-completion cost-to-cost measure of progress. Under the percentage-of-completion cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs to complete the product or service. Certain sales are recognized at a point in time, which typically occurs upon customer acceptance or receipt of the product or service.
Significant judgments and assumptions are made in estimating contract sales, costs, and profit. We estimate profit as the difference between total estimated sales and total estimated costs to complete the contract and recognize that profit as costs are incurred (over time sales recognition) or when the customer accepts the product or service (point in time sales recognition). Contract sales may include estimates of variable consideration, including cost or performance incentives (such as award and incentive fees), un-priced change orders, requests for equitable adjustment (REAs), and contract claims. Variable consideration is included in total estimated sales to the extent it is probable that a significant reversal in the amount of cumulative sales recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We estimate variable consideration as the most likely amount to which we expect to be entitled. Contract costs include significant estimates related to labor, subcontractors, materials, overhead, general and administrative expenses, and costs to fulfill our industrial cooperation agreements, sometimes referred to as offset or localization agreements, required under certain contracts with international customers. Significant estimates related to
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Notes to Consolidated Financial Statements (unaudited) (continued)
costs include the complexity and scope of the work to be performed, labor productivity and availability, labor rates including terms of collective bargaining arrangements, execution by our subcontractors, the availability and cost of materials including any impact from changing costs or inflation, the length of time to complete the performance obligation, overhead and general and administrative cost rates, and estimated useful lives of components and assets, among others. In particular, fixed-price development programs involve significant management judgment, as development contracts by nature have elements that have not been done before and thus, are highly subject to future unexpected changes in estimates as described below.
At the outset of a long-term contract, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract, as well as our ability to earn variable consideration, and assess the effects of those risks on our estimates of sales and total costs to complete the contract. The estimates consider the technical requirements (e.g., a newly developed product versus a mature product), the schedule and associated tasks (e.g., the number and type of milestone events) and costs (e.g., labor, subcontractors, materials, overhead, general and administrative expenses, and offset or localization agreements). The initial profit booking rate of each contract considers risks surrounding the ability to achieve the technical requirements, schedule and costs in the initial estimated total costs to complete the contract. We review our estimates related to sales, cost, and profit for each contract at least annually or when a change in circumstances warrants a modification to a previous estimate. For significant contracts, we review our estimates more frequently. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities, and the related changes in estimates of revenues and costs. Profit booking rates may increase during the performance of the contract if we successfully retire risks related to earning variable consideration and/or the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract or may increase the variable consideration we expect to receive on the contract, which we refer to as favorable profit booking rate adjustments. Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase or our estimates of variable consideration we expect to receive decrease, which we refer to as unfavorable profit booking rate adjustments.
We recognize changes in estimated contract sales or costs and the resulting changes in contract profit on a cumulative basis. Cumulative profit booking rate adjustments represent the cumulative effect of the changes on current and prior periods; sales and operating margins in future periods are recognized as if the revised estimates had been used since contract inception. Profit booking rate adjustments can have a significant effect on our financial statements and affect the comparability of our segment sales, operating profit and operating margin. Segment operating profit and margin can also be impacted favorably or unfavorably by, for example, certain items such as the positive resolution of contractual matters, cost recoveries on severance and restructuring, insurance recoveries and gains on sales of assets, as well as unfavorable items including the adverse resolution of contractual matters, supply chain disruptions, restructuring charges (except for significant severance actions, which are excluded from segment operating results), reserves for disputes, certain asset impairments, and losses on sales of certain assets. When estimates of total costs to be incurred on a contract exceed total estimates of the transaction price, a provision for the entire loss is determined at the contract level and is recorded in the period in which the loss is evident, which we refer to as a reach-forward loss.
The following table presents the effect of profit booking rate adjustments on our financial results (in millions, except per share data):
| Quarters Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Sales | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Segment operating profit | ( | ( | ||||||||||||||||||||||||||||||||||||
| % of segment operating profit | ( | % | % | ( | % | % | ||||||||||||||||||||||||||||||||
| Net earnings | ( | ( | ||||||||||||||||||||||||||||||||||||
| Diluted earnings per share | ( | ( | ||||||||||||||||||||||||||||||||||||
During the quarter ended June 29, 2025, we recorded losses of $950 million on an ongoing classified program at our Aeronautics business segment, and $570 million on Canadian Maritime Helicopter Program (CMHP) and $95 million on Türkish Utility Helicopter Program (TUHP) at our RMS business segment. During the six months ended June 29, 2025, in
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Notes to Consolidated Financial Statements (unaudited) (continued)
addition to the losses above, we recorded $125 million of adjustments resulting from favorable performance upon completion on certain commercial civil space programs at Space and an $80 million favorable adjustment upon completion of a classified program at Aeronautics. During the six months ended June 30, 2024 we recognized a reach-forward loss of $100 million on a classified program at our MFC business segment.
We have various development programs for new and upgraded products, services, and related technologies which have complex design and technical challenges. This development work is inherently uncertain and subject to significant variability in estimates of the cost and time required to complete the work by us and our suppliers. Many of these programs have cost-type contracting arrangements (e.g. cost-reimbursable or cost-plus-fee). In such cases, the associated financial risks are primarily in reduced fees, lower profit rates, or program cancellation if cost, schedule, or technical performance issues arise. However, some of our existing development programs are contracted on a fixed-price basis or include cost-type contracting for the development phase with fixed-price production options and our customers continue to implement procurement strategies such as these that shift risk to contractors. Competitively bid programs with fixed-price development work or fixed-price production options increase the risk of a reach-forward loss upon contract award and during the period of contract performance. Due to the complex and often experimental nature of development programs, we may experience (and have experienced in the past) technical and quality issues during the development of new products or technologies for a variety of reasons. Our development programs are ongoing, and while we believe the cost and fee estimates incorporated in the financial statements are appropriate, the technical complexity of these programs and fixed-price contract structure creates financial risk as estimated completion costs may exceed the current contract value, which could trigger earnings charges, termination provisions, or other financially significant exposures. These programs have risk for reach-forward losses if our estimated costs exceed our estimated contract revenues, and such losses could be significant to our financial condition and operating results in any period that they are recognized. Any such losses are recognized in the period in which the loss is evident.
We have experienced significant performance issues on an existing classified program at our Aeronautics business segment. The initial phase is on a fixed-price incentive fee contract with fixed-price incentive fee options for additional phases. Phases within the program involve highly complex design and systems integration and we had previously recognized reach-forward losses amounting to $730 million on the initial phase and $95 million on the additional phases. Challenges and performance issues continued into 2025 and had a greater impact on schedule and costs than previously estimated. As a result, Aeronautics performed a comprehensive review of its design, integration, test, and other processes to achieve the technical requirements of the program, which was completed in the second quarter of 2025. Based on this review and ongoing discussions with the customer and suppliers, Aeronautics made significant changes to its processes and testing approach, resulting in significant updates to the program’s schedule and cost estimates. As a result, during the second quarter of 2025, we recognized additional reach-forward losses on the initial phase of $690 million and on additional phases of $260 million. The drivers that gave rise to the growth recognized on the initial phase and downstream impacts on estimates of cost and profitability in additional phases include: (1) observed software development performance degradation and integration findings; (2) learnings in recent software and build experience on other programs; (3) significant changes in test plan; (4) safety-critical and other necessary design and engineering changes; and (5) complete schedule realignment. As of June 29, 2025, cumulative losses recognized to date on this program were approximately $1.4 billion on the initial phase and $355 million on the additional phases. As of June 29, 2025, $583 million remained accrued in other current liabilities in our consolidated balance sheet. We will continue to proactively manage the technical requirements and our performance, the remaining work and any future changes in scope or schedule, and estimated costs to complete the program, including future phases. We may need to record additional losses in future periods if we experience further performance issues, increases in scope, or cost growth. Any such losses could be material to our financial results in any period that they are recognized. We and our industry team will continue to incur advanced procurement costs (also referred to as pre-contract costs) to enhance our ability to achieve the schedule and certain milestones which could be significant. We will monitor the recoverability of pre-contract costs, which could be impacted by our assessment of the customer’s decision regarding the funding of future phases of the program.
Our MFC business segment has been performing under a competitively bid classified contract, which includes a cost-reimbursable base contract for the initial phase of the program and multiple fixed-price options for additional phases. We previously disclosed that the options may be exercised over the next several years and if performed expect they would each be at a loss. During the first quarter of 2024, we concluded it was probable that the first option would be exercised and recognized a reach-forward loss of approximately $100 million. During the fourth quarter of 2024, we again assessed the likelihood that additional options may be exercised and concluded then that it is probable that all options will be exercised based on performance to date, future requirements of the program, discussions with the customer and suppliers, and anticipated customer funding, among other factors, resulting in the recognition of additional reach-forward
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Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
losses of approximately $1.31 billion. As of June 29, 2025, cumulative losses recognized on the program remained at approximately $1.46 billion in total, of which, $1.30 billion remained accrued in other current liabilities in our consolidated balance sheet.
We have contracted with the Canadian government for the Canadian Maritime Helicopter Program (CMHP) at our RMS business segment. The program provides for design, development, and production of CH-148 aircraft (the Original Equipment contract), which is a military variant of the S-92 helicopter, and for logistical support to the fleet (the In Service Support contract) over an extended time period. While we continue to be in discussions with the Canadian government to potentially restructure certain contractual terms and conditions that may be beneficial to both parties, and entered into a contract modification in 2024 to better align contract scope with the Canadian government’s need, which resulted in a reduction in our contract assets in the fourth quarter of 2024 and first quarter of 2025, any restructuring discussions may be prolonged or unsuccessful, and could result in a contract termination, and are dependent upon Canadian government resources and priorities and other factors outside of our control, such as trade relations with the United States. Communications with the customer during the second quarter of 2025 led to subsequent decisions made by us to focus on providing additional mission capabilities, enhanced logistical support, fleet life extension, and revised expectations regarding flight hours. Based on the ongoing discussions with the customer and decisions made by management, we revised our cost and sales estimates for this program. As a result, during the second quarter of 2025 we recognized additional losses of $570 million on the program. As of June 29, 2025, cumulative losses recognized on the program were approximately $670 million and approximately $680 million of contract assets remained on the balance sheet. Future performance issues or changes in our estimates may affect our ability to recover our costs, including recovery of the contract assets recognized on the balance sheet and our assessment of the reach-forward loss, and potential damages, which could be material to our financial results in any period that they are recognized.
We also have a number of contracts with Türkish industry for the Türkish Utility Helicopter Program (TUHP), which anticipates co-production with Türkish industry for production of T70 helicopters for use in Türkiye, as well as the related provision of Türkish goods and services under buy-back or offset obligations, to include the future sales of helicopters built in Türkiye for sale globally. In 2020, the U.S. Government imposed certain sanctions on Türkish entities and persons that have affected our ability to perform under the TUHP contracts. We have provided force majeure notices under the affected contracts and partially stopped work on TUHP effective October 5, 2024. We have been in discussions with our prime contract customer regarding the path forward for the program in light of the continued impact of the sanctions on our ability to perform under the TUHP contracts and our decision to partially stop work, including recent discussions of a potential mutually agreeable framework to restructure the program, including changing the scope of work. Our customer has asserted that it is entitled to penalties and damages, that we do not have the contractual right to stop work and that our decision to stop work may lead to a termination for default and additional penalties and damages. In light of the status of the continuing discussions with our prime contract customer and the current status of the TUHP program, we recognized a loss of $95 million in the second quarter of 2025. As of June 29, 2025, cumulative losses recognized to date on the program were approximately $130 million and the program remains in a contract liability position on the balance sheet. Additionally, if we are unable to finalize an agreement on mutually agreeable terms, we or our customer could elect to pursue other relief or remedies, which could result in a further reduction in sales, the imposition of penalties or assessment of damages, including the drawdown by the customer of letters of credit and performance bonds, and increased unrecoverable costs, which could be material to our financial results in any period that they are recognized.
Commercial Paper
We have agreements in place with financial institutions to provide for the issuance of commercial paper. The outstanding balance of commercial paper can fluctuate daily and the amount outstanding during the period may be greater or less than the amount reported at the end of the period. As of June 29, 2025, we had $1.4 billion of commercial paper borrowings with a weighted-average rate of 4.55 %. As of December 31, 2024 we had no commercial paper borrowings outstanding. All of our commercial paper borrowings had maturities of up to three months or less from the date of issuance. We may, as conditions warrant, continue to issue commercial paper backed by our revolving credit facility to manage the timing of cash flows.
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Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
Backlog
Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. It is converted into sales in future periods as work is performed or deliveries are made. For our cost-reimbursable and fixed-priced-incentive contracts, the estimated consideration we expect to receive pursuant to the terms of the contract may exceed the contractual award amount. The estimated consideration is determined at the outset of the contract and is continuously reviewed throughout the contract period. In determining the estimated consideration, we consider the risks related to the technical, schedule and cost impacts to complete the contract and an estimate of any variable consideration. Periodically, we review these risks and may increase or decrease backlog accordingly. As the risks on such contracts are successfully retired, the estimated consideration from customers may be reduced, resulting in a reduction of backlog without a corresponding recognition of sales. As of June 29, 2025, our ending backlog was $166.5 billion. We expect to recognize approximately 38 % of our backlog over the next 12 months and a total of approximately 64 % over the next 24 months as revenue with the remainder recognized thereafter.
Impairment and Other Charges
During the second quarter of 2025, we recorded charges totaling $66 million ($52 million, or $0.22 per share, after-tax) primarily for the write-off of fixed assets resulting from the U.S. Air Force’s Next Generation Air Dominance (NGAD) competition and down-select decision.
During the second quarter of 2024, we recorded charges totaling $87 million ($69 million, or $0.29 per share, after-tax) for trademark and fixed asset impairments as well as severance costs resulting from the strategic review of our Sikorsky business during the second quarter of 2024 due, in part, to the impacts of the U.S. Army announcement to cancel the Future Attack Reconnaissance Aircraft (FARA) program at the conclusion of fiscal year 2024, for which our Sikorsky business was competing.
Income Taxes
Our effective income tax rates were 18.0 % and 16.3 % for the quarter and six months ended June 29, 2025 and 15.8
In our Annual Report on Form 10-K for the year ended December 31, 2018, we described our adoption of Accounting Standards Codification (ASC) 606 for certain manufacturing contracts. In connection with that change and the associated changes to the income recognition rules enacted in the 2017 Tax Cuts and Jobs Act, we correspondingly changed our method of accounting for U.S. federal income tax purposes with the Internal Revenue Service (IRS). As part of the IRS Compliance Assurance Process (CAP) program, the IRS initially approved that accounting method change for 2018 and 2019 without any adjustments, stating in writing that our new tax accounting method was an acceptable method that clearly reflected income.
After an additional review of the accounting method change in subsequent years, the IRS issued to us a Revenue Agent’s Report (RAR) for 2018-2019 on May 20, 2025 with an accompanying Notice of Proposed Adjustment (NOPA) for 2018-2020 in relation to our accounting method change (the Proposed Adjustments). The Proposed Adjustments, which seek approximately $4.6 billion of additional federal income tax (excluding interest), are based on the premise that we must recognize revenue as performance obligations on a contract are satisfied and as advance payments are received but must defer costs until delivery of the finished product. The Proposed Adjustments create a mismatch between revenue and costs, effectively disallow recognition of cost of goods sold for impacted contracts, and result in gross receipts taxation for each year at issue.
We strongly disagree with the IRS’s claims and are pursuing applicable administrative remedies with the IRS Independent Office of Appeals and, if necessary, judicial remedies if an acceptable administrative resolution cannot be reached. We do not expect resolution of this matter within twelve months and cannot predict with certainty the timing of such resolution. We believe our reserves for tax contingencies are adequate; however, if this matter is resolved unfavorably, there could be a material impact on our profitability and future cash flows.
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Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
As of December 31, 2024, our liabilities associated with uncertain tax positions were not material. As of the quarter ended June 29, 2025, our liabilities associated with uncertain tax positions increased to $512 million with a corresponding increase to net deferred tax assets primarily attributable to the Proposed Adjustments. As of the quarter ended June 29, 2025, interest and penalties related to uncertain tax positions, which are included in income tax expense, increased to $129 million with $103 million representing the cumulative amount related to the Proposed Adjustments.
NOTE 11 - RECENT ACCOUNTING PRONOUNCEMENTS
In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires entities to disclose certain expenses, including purchases of inventory, employee compensation, depreciation, and intangible asset amortization, by caption. Additionally, entities must provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The amendments are effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The ASU will impact only our disclosures and not our financial condition or results of operations. We are currently evaluating when we will adopt the ASU.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid. ASU No. 2023-09 requires public business entities to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid. The new standard is effective for annual periods beginning after December 15, 2024, and may be applied prospectively or retrospectively. We will adopt this ASU prospectively for the period ending December 31, 2025, and it will impact only our disclosures, with no impacts to our financial condition or results of operations.
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Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Lockheed Martin Corporation
Results of Review of Interim Financial Statements
We have reviewed the accompanying consolidated balance sheet of Lockheed Martin Corporation (the Company) as of June 29, 2025, the related consolidated statements of earnings, comprehensive income and equity for the quarters and six months ended June 29, 2025 and June 30, 2024, and consolidated statements of cash flows for the six months ended June 29, 2025 and June 30, 2024, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2024, the related consolidated statements of earnings, comprehensive income, cash flows and equity for the year then ended, and the related notes (not presented herein); and in our report dated January 28, 2025, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2024, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ Ernst & Young LLP
Tysons, Virginia
July 22, 2025
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand our results of operations and financial condition. The MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and notes to consolidated financial statements herein and with our Annual Report on Form 10-K for the year ended December 31, 2024 (2024 Form 10-K).
BUSINESS OVERVIEW
We are a global aerospace and defense company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. We also provide a broad range of management, engineering, technical, scientific, logistics, system integration and cybersecurity services. Our main areas of focus are in defense, space, intelligence, homeland security and information technology, including cybersecurity. We serve both U.S. and international customers with products and services that have defense, civil and commercial applications, with our principal customers being agencies of the U.S. Government. During the six months ended June 29, 2025, 73% of our $36.1 billion in sales were from the U.S. Government, either as a prime contractor or as a subcontractor (including 63% from the Department of Defense (DoD)), 27% were from international customers (including foreign military sales (FMS) contracted through the U.S. Government).
Global Security
We operate in a complex and evolving global security environment. Conflicts or tensions in areas such as Europe, the Middle East, and the Pacific region have heightened tensions and highlighted security requirements globally, including these regions as well as the U.S. Although these tensions and conflicts may drive interest in specific products or services as countries seek to improve their security posture, our business primarily operates on a long-cycle basis. As a result, the U.S. Government has been broadly focused on increasing industry capacity to meet long-term demand. We continue to work with the U.S. Government, international partners, and our supply chain to increase capacity and enhance our ability to scale our operations to anticipate potential demand, deliver critical capabilities, and replenish depleted U.S. and allied stockpiles of products that have been used over the past several years.
Global Economic and Geopolitical Environment
Our business and financial performance are impacted by general economic conditions including inflationary pressures, delays and disruptions in supply chains, business slowdowns or shutdowns, workforce challenges and labor shortfalls, and market volatility. These macroeconomic factors have contributed, and may continue to contribute, to increased costs, delays, disruptions and other performance challenges, as well as competing demands for limited resources to address such increased costs and other challenges, for our company, our suppliers and partners, and our customers.
We continue to experience supply chain challenges, including supplier shortages and performance issues. These issues have delayed certain customer deliveries, limited our ability to ramp up production in response to customer demand for certain products and have caused out-of-sequence manufacturing, which increases costs and decreases operational efficiency. In addition, elevated levels of inflation and macroeconomic conditions present risks for us, our suppliers and the stability of the broader defense industrial base. Certain costs, including rising labor rates and supplier costs, have increased as a result of inflation, and have adversely affected our margins on certain programs. In addition, some suppliers are reducing the duration of pricing validity of their proposals to us or seeking to reopen pricing on existing agreements, which is operationally challenging and increases the risk of cost volatility. Supply chain challenges, including both the availability and cost of goods, may be further impacted due to the imposition of tariffs and the availability of rare earth minerals, as discussed below under “Recent Developments in Trade and Regulatory Policies.” We continue to work to mitigate challenges caused by the supply chain or current macroeconomic environment on our business, including by supporting small business and at-risk suppliers, deploying resources to work with our supply chain, securing materials and support by executing long-term contracts, enforcing existing contract terms, identifying alternative sources, collaborating with our customers to address industry-wide challenges, and optimizing our supply chain organization through digital transformation and workforce development. If we experience significant supply chain issues or high rates of inflation, and are unable to successfully mitigate the impact, our future profits, margins and cash flows, particularly for existing fixed-price contracts, may be adversely affected. Inflation and higher interest rates can also constrain the overall purchasing power of our customers for our products and services potentially impacting future orders, especially in a budget constrained environment. We remain committed to our ongoing efforts to increase the efficiency of our operations and
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improve the cost competitiveness and affordability of our products and services, which may, in part, offset cost increases from inflation.
For additional risks to the company related to the supply chain and availability of materials, see Part I, Item 1A, “Risk Factors” of our 2024 Form 10-K.
Recent Developments in Trade and Regulatory Policies
Certain materials and component parts that go into making our products are imported into the U.S. and are subject to tariffs, sanctions, embargoes, export and import controls, and other trade restrictions. The U.S. Government under the Trump Administration has increased tariffs, imposed additional tariffs, and expanded tariffs on goods imported from various countries. We also export certain products to other countries, and several countries have increased tariffs or imposed additional tariffs in response to U.S. tariffs. The tariff environment has been dynamic over the last several months, with changes occurring on an ongoing basis, and it is likely that additional developments will occur over the next several months, particularly as the U.S. negotiates with trade partners.
The tariffs that have been enacted or expanded by the U.S. or other countries did not materially impact our business or financial results for the six months ended June 29, 2025. We are currently evaluating the potential future impacts of the imposition of the announced tariffs to our business and financial condition. At this time, we do not believe that the tariffs announced by the U.S. or actions taken in response to these tariffs by other countries will have a material adverse effect upon our results of operations, financial condition, or cash flows. However, the actual impact of the new tariffs is subject to a number of factors including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any countermeasures that the target countries may take, how our Tier 1 and Tier 2 suppliers react, possible substitution effects, possible duty drawbacks, and any mitigating actions that may become available.
Significant changes in tax, trade, or other policies either in the U.S. or other countries, as well as any fluctuation in foreign exchange rates as a result of such activity, could materially increase our tax burden, the price we pay for materials and component parts, the price our customers pay, and result in delays in products received or non-delivery from our vendors as well as impact the availability of materials (including rare earth minerals), which could materially impact our business and financial results. We are pursuing available options to fully or substantially mitigate the impact of the increased tariffs or any future tariffs, including seeking exclusions, through drawbacks, refunds, recovering the costs in the pricing of our products, securing alternative sources of materials or products, or, in certain cases, qualifying for duty-free treatment. However, these actions may not be successful in fully or substantially mitigating the impact of tariffs, and, even if successful, there could be a near term impact on cash flows due to the timing of when tariffs are paid compared to when such costs may be refunded or recovered.
In addition, recent government actions relating to rare earth minerals that are used in certain of our products, including U.S. Government sourcing prohibitions on the import of such minerals and the imposition of export controls on such minerals by China, had raised concerns about supply availability earlier this year. Although rare earth shipments have resumed under a new U.S.-China framework agreement, exports remain subject to selective licensing and review by Chinese authorities, and the rare earth supply chain continues to be vulnerable to further disruption due to increasing scarcity and constrained capacity.
Lastly, the President has issued multiple Executive Orders, including two that are intended to (i) simplify and accelerate the procurement process through an overhaul of the Federal Acquisition Regulation (FAR), and its supplements and (ii) modernize the defense acquisition process by promoting commercial solutions, use of innovative acquisition authorities, and other existing streamlined processes. Among the actions directed by the President is a review of major defense acquisition programs that are more than 15% behind schedule or over budget, or not aligned with the Administration’s priorities, including identifying any programs for potential cancellation. While the impact of these reforms on our business is uncertain, they could potentially lead to changes in the way we interact with the U.S. Government, and we will continue to monitor and assess their effects on our business and financial results. Should the U.S. Government review one or more major defense programs in which we provide products and/or services, and this review leads to a full or partial cancellation of one of these programs, this could have an adverse effect on our business, financial condition, results of operations and cash flows.
For additional risks to the company related to the geopolitical and economic environment, see Part I, Item 1A, “Risk Factors” of our 2024 Form 10-K.
U.S. Government Budget Environment
Our primary customer is the U.S. Government, from which we derived 73% of our sales during the six months ended June 29, 2025, including 63% from the U.S. DoD. Funding for U.S. Government programs is subject to a variety of factors
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that can affect our business, including the administration’s budget requests and procurement priorities and policies, annual congressional budget authorization and appropriation processes, and other U.S. Government domestic and international priorities. U.S. Government spending levels, particularly defense spending, and timely funding thereof can affect our financial performance over the short and long term.
On March 15, 2025, the President signed into law the Full-Year Continuing Appropriations and Extensions Act, 2025 (the Act), which funds the U.S. Government under a continuing resolution through September 30, 2025, its fiscal year (FY) end. In total, the FY 2025 continuing resolution funding is roughly equivalent to the U.S. Government’s FY 2024 funding with a few anomalies and other smaller shifts in funding between appropriations titles. The Act increases the DoD FY 2025 base budget by $6 billion to a total of $831.5 billion, while reducing nondefense spending. Unlike other continuing resolution funding measures, the Act provides the DoD conditional authority to permit new program starts as long as they were included in the FY 2025 House or FY 2025 Senate appropriation bills and $8 billion in flexible funding, furthering the flexibility of DoD operating under a continuing resolution.
The Administration published its FY 2026 budget request in June 2025. The budget request includes $848.3 billion in the base budget (discretionary) funding, and $113.3 billion in reconciliation (mandatory) funding. The One Big Beautiful Bill Act passed the Senate and House, and was signed by the President on July 4, 2025. The bill provides more than $150 billion in mandatory funding (inclusive of the $113.3 billion) for DoD available until September 30, 2029.
The legislative process has been delayed due to the late release of the FY 2026 budget request. The House Appropriations Subcommittee on Defense (HAC-D) released its FY 2026 congressional marks using the FY 2025 enacted amounts as its baseline on June 12, 2025. The bill recommends $831.5 billion in discretionary funding for the DoD. The Senate Armed Services Committee marked up its version of the FY 2026 National Defense Authorization Act (FY 2026 NDAA) on July 10, 2025 and included a topline increase of $32.1 billion. The House Armed Services Committee (HASC) also completed their markup of the FY 2026 NDAA on July 15, 2025 and held at the topline of the FY 2026 President’s budget request.
We anticipate the federal budget, debt ceiling, additional potential tax law changes and regulatory environment will continue to be subject to debate and compromise shaped by, among other things, the new Administration and Congress, heightened political tensions, the global security environment, inflationary pressures, and macroeconomic conditions. The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs. Additionally, the administration continues to take steps to evaluate government-wide and defense-specific staffing and procurement, which includes assessing mission priorities, procurement methods, program performance, and other factors and then potentially taking action based on those assessments. Those actions remain uncertain and could result in impacts to both our current and future business prospects and financial performance.
See also the discussion of U.S. Government funding risks, in Part I, Item 1A, “Risk Factors” of our 2024 Form 10-K.
Portfolio Shaping Activities
On June 26, 2025, we paid $360 million, in cash, to close our acquisition of Amentum’s Rapid Solutions business (Rapid Solutions). This acquisition integrates Rapid Solutions’ advanced space and airborne mission capabilities, including intelligence, surveillance and reconnaissance technologies, into Lockheed Martin’s portfolio. The financial results of Rapid Solutions have been included within our operating results in the period post-acquisition. See “Note 1 – Basis of Presentation” included in our Notes to Consolidated Financial Statements for further information regarding the acquisition of Rapid Solutions.
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CONSOLIDATED RESULTS OF OPERATIONS
Our operating cycle is primarily long-term and involves many types of contracts for the design, development and manufacture of products and related activities with varying delivery schedules. Additionally, we close our books and records on the last Sunday of each month, except for the month of December, as our fiscal year ends on December 31, to align our financial closing with our business processes. Because of this, the number of weeks in a reporting quarter may vary slightly during the year and for comparable prior year periods. Consequently, the results of operations of a particular year, or year-to-year comparisons of sales and profits, may not be indicative of future operating results. The following discussions of comparative results should be reviewed in this context. All per share amounts cited in these discussions are presented on a “per diluted share” basis, unless otherwise noted.
Our consolidated results of operations were as follows (in millions, except per share data):
| Quarters Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Sales | $ | 18,155 | $ | 18,122 | $ | 36,118 | $ | 35,317 | ||||||||||||||||||||||||||||||
| Operating costs and expenses | (17,421) | (15,992) | (33,061) | (31,194) | ||||||||||||||||||||||||||||||||||
| Gross profit | 734 | 2,130 | 3,057 | 4,123 | ||||||||||||||||||||||||||||||||||
| Other income, net | 14 | 18 | 63 | 54 | ||||||||||||||||||||||||||||||||||
| Operating profit | 748 | 2,148 | 3,120 | 4,177 | ||||||||||||||||||||||||||||||||||
| Interest expense | (274) | (261) | (542) | (516) | ||||||||||||||||||||||||||||||||||
| Non-service FAS pension (expense) income | (99) | 15 | (197) | 31 | ||||||||||||||||||||||||||||||||||
| Other non-operating income, net | 42 | 46 | 72 | 91 | ||||||||||||||||||||||||||||||||||
| Earnings before income taxes | 417 | 1,948 | 2,453 | 3,783 | ||||||||||||||||||||||||||||||||||
| Income tax expense | (75) | (307) | (399) | (597) | ||||||||||||||||||||||||||||||||||
| Net earnings | $ | 342 | $ | 1,641 | $ | 2,054 | $ | 3,186 | ||||||||||||||||||||||||||||||
| Diluted earnings per common share | $ | 1.46 | $ | 6.85 | $ | 8.75 | $ | 13.24 | ||||||||||||||||||||||||||||||
Certain amounts reported in other income, net, including our share of earnings or losses from equity method investees, are included in the operating profit of our business segments. Accordingly, such amounts are included in the discussion of our business segment results of operations.
Sales
We generate sales from the delivery of products and services to our customers. Our consolidated sales were as follows (in millions):
| Quarters Ended | Six Months Ended | ||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | ||||||||||||||||||||||||||
| Products | $ | 15,149 | $ | 15,109 | $ | 30,085 | $ | 29,305 | |||||||||||||||||||||
| % of total sales | 83.4 | % | 83.4 | % | 83.3 | % | 83.0 | % | |||||||||||||||||||||
| Services | 3,006 | 3,013 | 6,033 | 6,012 | |||||||||||||||||||||||||
| % of total sales | 16.6 | % | 16.6 | % | 16.7 | % | 17.0 | % | |||||||||||||||||||||
| Total sales | $ | 18,155 | $ | 18,122 | $ | 36,118 | $ | 35,317 | |||||||||||||||||||||
Substantially all of our contracts are accounted for using the percentage-of-completion cost-to-cost method. Under the percentage-of-completion cost-to-cost method, we record sales on contracts over time based upon our progress towards completion on a particular contract, as well as our estimate of the profit to be earned at completion. The following discussion of material changes in our consolidated sales should be read in tandem with the subsequent discussion of changes in our consolidated operating costs and expenses and our business segment results of operations because
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changes in our sales are typically accompanied by a corresponding change in our operating costs and expenses due to the nature of the percentage-of-completion cost-to-cost method.
Product Sales
Product sales during the quarter ended June 29, 2025 were comparable to the same period in 2024. Higher product sales of approximately $325 million at MFC and $100 million at Space were offset by lower product sales of $375 million at RMS. Higher product sales at MFC were due to production ramp-up on Joint Air-to-Surface Standoff Missile (JASSM), Long Range Anti-Ship Missile (LRASM), and precision fires programs. Higher product sales at Space were due to higher volume on Orion and Next Generation Interceptor (NGI) programs partially offset by lower product sales due to program lifecycle on the Next Generation Overhead Persistent Infrared (Next Gen OPIR) system. Lower product sales at RMS were due to lower volume on radar and the Canadian Surface Combatant (CSC) programs, and the unfavorable cumulative adjustments to sales driven by recognizing a loss on Türkish Utility Helicopter Program (TUHP) as previously described. Product sales for Aeronautics were comparable as higher volume on F-35 production contracts was mostly offset by the unfavorable cumulative adjustment to sales driven by recognizing a loss on a classified contract in the second quarter of 2025. See “Note 10 – Other” included in our Notes to Consolidated Financial Statements for further details about program losses incurred at Aeronautics and RMS.
Product sales increased $780 million, or 3%, during the six months ended June 29, 2025, compared to the same period in 2024. The increase was primarily attributable to higher product sales of approximately $675 million at MFC, $145 million at Aeronautics and $80 million at Space offset by lower product sales of $120 million at RMS. Higher product sales at MFC were due to production ramp-up on JASSM, LRASM, and precision fires programs. Higher product sales at Aeronautics were due to higher volume on F-35 production contracts, partially offset by the unfavorable cumulative adjustment to sales driven by recognizing a loss on a classified contract in the second quarter of 2025. Higher product sales at Space were due to higher volume on NGI and Orion programs partially offset by lower product sales due to program lifecycle on the Next Gen OPIR system. Lower product sales at RMS were due to the unfavorable cumulative adjustment to sales driven by recognizing a loss on TUHP as previously described and lower production volume on Seahawk programs.
Service Sales
Service sales during the quarter ended June 29, 2025 were comparable to the same period in 2024. Lower service sales of approximately $180 million at RMS were offset by higher service sales of approximately $155 million at Aeronautics. Lower service sales at RMS were due to the unfavorable cumulative adjustment to sales driven by recognizing a loss on Canadian Maritime Helicopter Program (CMHP) as previously described. Higher service sales at Aeronautics were due to higher volume on F-35 sustainment contracts.
Service sales during the six months ended June 29, 2025 were comparable to the same period in 2024. Higher service sales of approximately $210 million at Aeronautics were offset by lower service sales of approximately $195 million at RMS. Higher service sales at Aeronautics were due to higher volume on F-35 sustainment contracts. Lower service sales at RMS were due to the unfavorable cumulative adjustment to sales driven by recognizing a loss on CMHP as previously described.
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Operating Costs and Expenses
Operating costs and expenses, for both products and services, consist of materials, labor, subcontracting costs and an allocation of indirect costs (overhead and general and administrative), as well as the costs to fulfill our industrial cooperation agreements, sometimes referred to as offset agreements, required under certain contracts with international customers. For each of our contracts, we monitor the nature and amount of costs at the contract level, which form the basis for estimating our total costs to complete the contract.
Our consolidated operating costs and expenses were as follows (in millions):
| Quarters Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Operating costs and expenses – products | $ | (14,469) | $ | (13,520) | $ | (27,753) | $ | (26,404) | ||||||||||||||||||||||||||||||
| % of product sales | 95.5 | % | 89.5 | % | 92.2 | % | 90.1 | % | ||||||||||||||||||||||||||||||
| Operating costs and expenses – services | (3,130) | (2,582) | (5,770) | (5,185) | ||||||||||||||||||||||||||||||||||
| % of service sales | 104.1 | % | 85.7 | % | 95.6 | % | 86.2 | % | ||||||||||||||||||||||||||||||
| Impairment and other charges | (66) | (87) | (66) | (87) | ||||||||||||||||||||||||||||||||||
| Other unallocated, net | 244 | 197 | 528 | 482 | ||||||||||||||||||||||||||||||||||
| Total operating costs and expenses | $ | (17,421) | $ | (15,992) | $ | (33,061) | $ | (31,194) | ||||||||||||||||||||||||||||||
The following discussion of material changes in our consolidated operating costs and expenses for products and services should be read in tandem with the preceding discussion of changes in our consolidated sales and our business segment results of operations. Except for potential impacts to our programs resulting from supply chain disruptions, inflation, and tariffs, we have not identified any additional developing trends in operating costs and expenses for products and services that could have a material impact on our future operations.
Product Costs
Product costs increased $949 million, or 7%, during the quarter ended June 29, 2025, compared to the same period in 2024. The increase was primarily attributable to higher product costs of approximately $880 million at Aeronautics and $285 million at MFC, partially offset by lower product costs of approximately $290 million at RMS. Higher product costs at Aeronautics were due to the impact of recognizing a loss on a classified contract in the second quarter of 2025 and higher volume as described above in “Product Sales”. Higher product costs at MFC were due to production ramp up as described above in “Product Sales”. Lower product costs at RMS were due to lower volume as described above in “Product Sales”.
Product costs increased $1.3 billion, or 5%, during the six months ended June 29, 2025, compared to the same period in 2024. The increase was primarily attributable to higher product costs of approximately $995 million at Aeronautics and $485 million at MFC, partially offset by lower product costs of approximately $95 million at RMS. Higher product costs at Aeronautics were due to the impact of recognizing a loss on a classified contract as described above and higher volume as described above in “Product Sales”. Higher product costs at MFC were due to production ramp up as described above in “Product Sales”. Lower product costs at RMS were due to lower production volume as described above in “Product Sales”.
Service Costs
Service costs increased $548 million, or 21%, during the quarter ended June 29, 2025, compared to the same period in 2024. The increase was primarily attributable to higher service costs of approximately $400 million at RMS and $110 million at Aeronautics. Higher service costs at RMS were due to the impact of recognizing losses on CMHP as previously described. Higher service costs at Aeronautics were due to higher volume as described above in “Service Sales”.
Service costs increased $585 million, or 11%, during the six months ended June 29, 2025, compared to the same period in 2024. The increase was primarily attributable to higher service costs of approximately $400 million at RMS and $165 million at Aeronautics. Higher service costs at RMS were due to the impact of recognizing losses on CMHP as previously described. Higher service costs at Aeronautics were due to higher volume as described above in “Service Sales”.
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Impairment and Other Charges
We recorded charges totaling $66 million ($52 million, or $0.22 per share, after-tax) during the quarter ended June 29, 2025 and $87 million ($69 million, or $0.29 per share, after-tax) during the same period in 2024. See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.
Other Unallocated, Net
Other unallocated, net primarily includes the FAS/CAS pension operating adjustment (which represents the difference between total CAS pension cost recorded in our business segments’ results of operations and the service cost component of FAS pension (expense) income), stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, intangible asset amortization expense and other corporate costs. These items are not allocated to the business segments and, therefore, are not allocated to operating costs and expenses for products or services. Other unallocated, net reduced operating expenses by $244 million and $528 million during the quarter and six months ended June 29, 2025, compared to $197 million and $482 million during the quarter and six months ended June 30, 2024. The increase in other unallocated, net was primarily due to higher gains from the changes in the fair value of assets and liabilities related to deferred compensation plans during the quarter and six months ended June 29, 2025 compared to the same periods in 2024 and fluctuations in costs associated with various corporate items, none of which were individually significant.
Other Income, Net
Other income, net during the quarter ended June 29, 2025 was comparable to the same period in 2024. Other income, net was $63 million and $54 million during the six months ended June 29, 2025 and June 30, 2024. Other income, net, primarily includes earnings generated by equity method investees, as well as gains or losses for acquisitions, divestitures, and other items, none of which are individually significant. The increase in other income, net during the six months ended June 29, 2025 resulted primarily from an intellectual property license arrangement.
Interest Expense
Interest expense was $274 million and $542 million during the quarter and six months ended June 29, 2025, compared to $261 million and $516 million during the quarter and six months ended June 30, 2024. The increase in interest expense in 2025 resulted primarily from the issuance of commercial paper and senior unsecured notes in December 2024.
Non-service FAS Pension (Expense) Income
Non-service FAS pension expense was $99 million and $197 million during the quarter and six months ended June 29, 2025, compared to non-service FAS pension income of $15 million and $31 million during the quarter and six months ended June 30, 2024. The increase in expense was primarily due to higher prior service cost amortization and a reduced asset base as detailed in “Note 6 - Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements.
Other Non-operating Income, net
Other non-operating income, net primarily includes gains or losses related to adjustments in valuation of early-stage company investments or gains or losses upon the sale of these investments and interest income earned on cash and cash equivalents. Other non-operating income, net was $42 million and $72 million during the quarter and six months ended June 29, 2025, compared to $46 million and $91 million during the quarter and six months ended June 30, 2024. See “Note 8 - Fair Value Measurements” included in our Notes to Consolidated Financial Statements for additional information.
Income Tax Expense
Our effective income tax rates were 18.0% and 16.3% for the quarter and six months ended June 29, 2025 and 15.8% for both the quarter and six months ended June 30, 2024. The higher effective income tax rates for the quarter and six months ended June 29, 2025 were primarily attributable to increased interest expense on our uncertain tax position partially offset by changes in pre-tax earnings due to program losses previously described. The rates for all periods benefited from tax deductions for foreign derived intangible income, research and development tax credits, dividends paid to our defined contribution plans with an employee stock ownership plan feature and employee equity awards.
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Changes in U.S. (federal or state) or foreign tax laws and regulations, or their interpretation and application (including those with retroactive effect), could significantly impact our provision for income taxes, the amount of taxes payable, our deferred tax asset and liability balances, and stockholders’ equity. In addition to future changes in tax laws, the amount of net deferred tax assets will change periodically based on several factors, including the measurement of our postretirement benefit plan obligations, actual cash contributions to our postretirement benefit plans and the change in the amount or reevaluation of uncertain tax positions.
As a result of an IRS tax audit related to our adoption of Accounting Standards Codification (ASC) 606 for certain manufacturing contracts and the associated changes to the income recognition rules enacted in the 2017 Tax Cuts and Jobs Act, the IRS has proposed adjustments that could result in significant additional federal income tax. We are pursuing administrative and potentially judicial remedies to resolve this matter. We believe our reserves for tax contingencies are adequate; however, the outcome of this matter is uncertain, and if this matter is resolved unfavorably, there could be a material impact on our profitability and future cash flows. See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.
We are regularly under audit or examination by tax authorities, including U.S. and foreign tax authorities (Australia, Canada, India, Italy, Japan, Poland, the United Kingdom, and other countries). The final resolution of tax audits and any related administrative reviews or litigation could result in unanticipated increases in our tax expense and changes to the timing of required tax payments, which could affect profitability and cash flows for any particular reporting period. These increases or changes could have a material impact on financial condition and results of operations in such period.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development (R&D) expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years for tax purposes. On July 4, 2025, the President signed into law the One Big Beautiful Bill Act (the Tax Act). The Tax Act, among other things, reinstates full deduction of R&D expenditures starting in 2025. We are in the process of evaluating the impact of the Tax Act on our consolidated financial statements. However, we expect the Tax Act to decrease our cash tax liability for 2025.
The Organisation for Economic Co-operation and Development (OECD) has established a framework for a global minimum corporate tax of 15%, known as Pillar 2, which will be applied on a country-by-country basis to companies with global revenues and profits above certain thresholds. The implementation of Pillar 2 is phased, with certain aspects effective on January 1, 2024, and others on January 1, 2025. Although the United States has not enacted legislation to adopt Pillar 2, and its future adoption is uncertain, several countries where we operate have enacted such legislation, and others are in the process of doing so. We do not expect Pillar 2 to have a material impact on our effective tax rate or our financial condition and results of operations.
Net Earnings
We reported net earnings of $342 million ($1.46 per share) and $2.1 billion ($8.75 per share) during the quarter and six months ended June 29, 2025 and $1.6 billion ($6.85 per share) and $3.2 billion ($13.24 per share) during the quarter and six months ended June 30, 2024. Net earnings and earnings per share for the quarter and six months ended June 29, 2025 were affected by the factors mentioned above. Earnings per share also benefited from a net decrease of approximately 5.3 million and 5.8 million weighted average common shares outstanding during the quarter and six months ended June 29, 2025, compared to the same periods in 2024. The reduction in weighted average common shares was a result of share repurchases, partially offset by share issuances under our stock-based awards and certain defined contribution plans.
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BUSINESS SEGMENT RESULTS OF OPERATIONS
Our operations are organized into four business segments, which also comprise our reportable segments: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. We generally organize our business segments based on the nature of products and services offered.
Business segment operating profit excludes the FAS/CAS pension operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government Cost Accounting Standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance. See “Note 3 - Information on Business Segments – Unallocated Items” included in our Notes to Consolidated Financial Statements for additional information.
Sales and operating profit for each of our business segments were as follows (in millions):
| Quarters Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Sales | ||||||||||||||||||||||||||||||||||||||
| Aeronautics | $ | 7,420 | $ | 7,277 | $ | 14,477 | $ | 14,122 | ||||||||||||||||||||||||||||||
| Missiles and Fire Control | 3,433 | 3,102 | 6,806 | 6,095 | ||||||||||||||||||||||||||||||||||
| Rotary and Mission Systems | 3,995 | 4,548 | 8,323 | 8,636 | ||||||||||||||||||||||||||||||||||
| Space | 3,307 | 3,195 | 6,512 | 6,464 | ||||||||||||||||||||||||||||||||||
| Total sales | $ | 18,155 | $ | 18,122 | $ | 36,118 | $ | 35,317 | ||||||||||||||||||||||||||||||
| Operating profit (loss) | ||||||||||||||||||||||||||||||||||||||
| Aeronautics | $ | (98) | $ | 751 | $ | 622 | $ | 1,430 | ||||||||||||||||||||||||||||||
| Missiles and Fire Control | 479 | 450 | 944 | 761 | ||||||||||||||||||||||||||||||||||
| Rotary and Mission Systems | (172) | 495 | 349 | 925 | ||||||||||||||||||||||||||||||||||
| Space | 362 | 346 | 741 | 671 | ||||||||||||||||||||||||||||||||||
| Total business segment operating profit | 571 | 2,042 | 2,656 | 3,787 | ||||||||||||||||||||||||||||||||||
| Unallocated items | ||||||||||||||||||||||||||||||||||||||
| FAS/CAS pension operating adjustment | 379 | 406 | 758 | 812 | ||||||||||||||||||||||||||||||||||
Impairment and other charges (a) | (66) | (87) | (66) | (87) | ||||||||||||||||||||||||||||||||||
| Intangible asset amortization expense | (63) | (61) | (127) | (122) | ||||||||||||||||||||||||||||||||||
| Other, net | (73) | (152) | (101) | (213) | ||||||||||||||||||||||||||||||||||
| Total unallocated items | 177 | 106 | 464 | 390 | ||||||||||||||||||||||||||||||||||
| Total consolidated operating profit | $ | 748 | $ | 2,148 | $ | 3,120 | $ | 4,177 | ||||||||||||||||||||||||||||||
(a)See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.
Segment results exclude intersegment transactions as these activities are eliminated in consolidation and are not considered in assessing the performance of each segment. Business segment operating profit includes our share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of our business segments.
Our business segment results of operations include pension expense as calculated under CAS, which we refer to as CAS pension cost. We recover CAS pension and other postretirement benefit plan cost through the pricing of our products and services on U.S. Government contracts and, therefore, recognize CAS pension cost in each business segments’ sales and operating costs and expenses. Our consolidated financial statements must present pension and other postretirement benefit plan (expense) income calculated in accordance with Financial Accounting Standards (FAS) requirements under U.S. GAAP. The FAS/CAS pension operating adjustment represents the difference between CAS pension cost included in segment operating income and the service cost component of FAS pension (expense) income included in consolidated operating profit. To the extent that CAS pension cost exceeds the service cost component of FAS pension (expense) income we have a favorable FAS/CAS pension operating adjustment. The non-service FAS pension (expense) income components are included in non-service FAS pension (expense) income on our consolidated statements of earnings.
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The total FAS/CAS pension adjustments, including the service and non-service cost components of FAS pension (expense) income for our qualified defined benefit pension plans, were as follows (in millions):
| Quarters Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Total FAS (expense) income and CAS cost | ||||||||||||||||||||||||||||||||||||||
| FAS pension (expense) income | $ | (112) | $ | — | $ | (223) | $ | 1 | ||||||||||||||||||||||||||||||
| Less: CAS pension cost | 392 | 421 | 784 | 842 | ||||||||||||||||||||||||||||||||||
| Total FAS/CAS pension adjustment | $ | 280 | $ | 421 | $ | 561 | $ | 843 | ||||||||||||||||||||||||||||||
| Service and non-service cost reconciliation | ||||||||||||||||||||||||||||||||||||||
| FAS pension service cost | $ | (13) | $ | (15) | $ | (26) | $ | (30) | ||||||||||||||||||||||||||||||
| Less: CAS pension cost | 392 | 421 | 784 | 842 | ||||||||||||||||||||||||||||||||||
| Total FAS/CAS pension operating adjustment | 379 | 406 | 758 | 812 | ||||||||||||||||||||||||||||||||||
| Non-service FAS pension (expense) income | (99) | 15 | (197) | 31 | ||||||||||||||||||||||||||||||||||
| Total FAS/CAS pension adjustment | $ | 280 | $ | 421 | $ | 561 | $ | 843 | ||||||||||||||||||||||||||||||
Management evaluates performance on our contracts by focusing on sales and operating profit and not by type or amount of operating expense. Consequently, our discussion of business segment performance focuses on sales and operating profit, consistent with our approach for managing the business. This approach is consistent throughout the life cycle of our contracts, as management assesses the bidding of each contract by focusing on sales and operating profit and monitors performance on our contracts in a similar manner through their completion.
We regularly provide customers with reports of our costs as the contract progresses. The cost information in the reports is accumulated in a manner specified by the requirements of each contract. For example, cost data provided to a customer for a product would typically align to the subcomponents of that product (such as a wing-box on an aircraft) and for services would align to the type of work being performed (such as aircraft sustainment). Our contracts generally allow for the recovery of costs in the pricing of our products and services. Most of our contracts are bid and negotiated with our customers under circumstances in which we are required to disclose our estimated total costs to provide the product or service. This approach for negotiating contracts with our U.S. Government customers generally allows for recovery of our actual costs plus a reasonable profit margin. We also may enter into long-term supply contracts for certain materials or components to coincide with the production schedule of certain products and to ensure their availability at known unit prices.
We have a number of programs that are designated as classified by the U.S. Government, and that cannot be specifically described. The operating results of these classified programs are included in our consolidated and business segment results and are subject to the same oversight and internal controls as our other programs.
Our sales are primarily derived from long-term contracts for products and services provided to the U.S. Government as well as FMS contracted through the U.S. Government. We recognize revenue as performance obligations are satisfied and the customer obtains control of the products and services. For performance obligations to deliver products with continuous transfer of control to the customer, revenue is recognized based on the extent of progress towards completion of the performance obligation, generally using the percentage-of-completion cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer as we incur costs on our contracts. For performance obligations in which control does not continuously transfer to the customer, we recognize revenue at the point in time in which each performance obligation is fully satisfied.
Many of our contracts span several years and include highly complex technical requirements. At the outset of a contract accounted for under the percentage-of-completion cost-to-cost method, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract, as well as our ability to earn variable consideration, and assess the effects of those risks on our estimates of sales and total costs to complete the contract. The estimates consider the technical requirements (e.g., a newly developed product versus a mature product), the schedule and associated tasks (e.g., the number and type of milestone events) and costs (e.g., material, labor, subcontractor, overhead and the estimated costs to fulfill our industrial cooperation agreements, sometimes referred to as offset or localization agreements, required under certain contracts with international customers). The initial profit booking rate of each contract considers risks surrounding the ability to achieve the technical requirements, schedule and costs in the
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initial estimated total costs to complete the contract and variable considerations. Profit booking rates may increase during the performance of the contract if we successfully retire risks related to the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract or may increase the variable consideration we expect to receive on the contract. Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase or our estimates of variable consideration we expect to receive decrease. The profit booking rate may also be adjusted if the total estimated value of the contract changes or there is a contract modification. All of the estimates are subject to change during the performance of the contract and may affect the profit booking rate. For further discussion on fixed-price contracts, see “Note 10 - Other” included in our Notes to Consolidated Financial Statements.
Changes in sales and operating profit generally are expressed in terms of volume, contract mix, and/or performance (referred to as profit booking rate adjustments). Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract. Contract mix primarily refers to changes in the ratio of contract type or life cycle (e.g., cost-type, fixed-price, development, production and/or sustainment) and other cost recoveries.
Comparability of our segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on our contracts.
The following table presents the effect of our consolidated net profit booking rate adjustments on segment operating profit (in millions):
| Quarters Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Aeronautics | $ | (730) | $ | 120 | $ | (620) | $ | 210 | ||||||||||||||||||||||||||||||
| Missiles and Fire Control | 130 | 155 | 260 | 150 | ||||||||||||||||||||||||||||||||||
| Rotary and Mission Systems | (550) | 60 | (465) | 100 | ||||||||||||||||||||||||||||||||||
| Space | 105 | 85 | 260 | 155 | ||||||||||||||||||||||||||||||||||
| Total business segment operating profit | $ | (1,045) | $ | 420 | $ | (565) | $ | 615 | ||||||||||||||||||||||||||||||
During the quarter ended June 29, 2025, we recorded losses of $950 million on an ongoing classified program at our Aeronautics business segment, and $570 million on CMHP and $95 million on TUHP at our RMS business segment. During the six months ended June 29, 2025, in addition to the losses above, we recorded $125 million of adjustments resulting from favorable performance upon completion on certain commercial civil space programs at Space and an $80 million favorable adjustment upon completion of a classified program at Aeronautics. During the six months ended June 30, 2024 we recognized a reach-forward loss of $100 million on a classified program at our MFC business segment.
Aeronautics
Summary operating results for our Aeronautics business segment were as follows (in millions):
| Quarters Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Sales | $ | 7,420 | $ | 7,277 | $ | 14,477 | $ | 14,122 | ||||||||||||||||||||||||||||||
| Operating (loss) profit | (98) | 751 | 622 | 1,430 | ||||||||||||||||||||||||||||||||||
| Operating margin | (1.3 | %) | 10.3 | % | 4.3 | % | 10.1 | % | ||||||||||||||||||||||||||||||
Aeronautics’ sales during the quarter ended June 29, 2025 increased $143 million, or 2%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $470 million on the F-35 program due to higher volume on production contracts. This increase was partially offset by a $360 million unfavorable cumulative adjustment to sales driven by the loss on a classified contract as previously described.
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Aeronautics’ operating profit during the quarter ended June 29, 2025 decreased $849 million, or 113%, compared to the same period in 2024. The decrease was attributable to the previously described $950 million reach forward loss recognized on a classified contract, which was partially offset by a $90 million increase on the F-35 program due to higher profit booking rate adjustments and volume as described above.
Aeronautics’ sales during the six months ended June 29, 2025 increased $355 million, or 3%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $685 million on the F-35 program due to higher volume on production contracts. This increase was partially offset by a $360 million unfavorable cumulative adjustment to sales driven by the loss on a classified contract as previously described.
Aeronautics’ operating profit during the six months ended June 29, 2025 decreased $808 million, or 57%, compared to the same period in 2024. The decrease was attributable to the previously described $950 million reach forward loss recognized on a classified contract. This decrease was partially offset by a $110 million increase on the F-35 program due to higher volume as described above and higher profit booking rate adjustments and an $80 million profit booking rate adjustment in the first quarter of 2025 resulting from favorable performance at completion on a classified program.
Missiles and Fire Control
Summary operating results for our MFC business segment were as follows (in millions):
| Quarters Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Sales | $ | 3,433 | $ | 3,102 | $ | 6,806 | $ | 6,095 | ||||||||||||||||||||||||||||||
| Operating profit | 479 | 450 | 944 | 761 | ||||||||||||||||||||||||||||||||||
| Operating margin | 14.0 | % | 14.5 | % | 13.9 | % | 12.5 | % | ||||||||||||||||||||||||||||||
MFC’s sales during the quarter ended June 29, 2025 increased $331 million, or 11%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $330 million on tactical and strike missile programs due to production ramp-up on JASSM, LRASM and precision fires programs.
MFC’s operating profit during the quarter ended June 29, 2025 increased $29 million, or 6%, compared to the same period in 2024. This increase was attributable to three primary factors: a $35 million increase from production ramp up as described above, and a $25 million increase from favorable contract mix; partially offset by a $25 million decrease in profit booking rate adjustments. The decrease in profit booking rate adjustments was primarily due to lower favorable profit adjustments on Patriot Advanced Capability-3 (PAC-3).
MFC’s sales during the six months ended June 29, 2025 increased $711 million, or 12%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $700 million on tactical and strike missile programs due to production ramp-up on JASSM, LRASM, and precision fires programs.
MFC’s operating profit during the six months ended June 29, 2025 increased $183 million, or 24%, compared to the same period in 2024. This increase was attributable to two primary factors: a $110 million increase in profit booking rate adjustments and a $60 million volume increase driven by production ramp-up as described above. The increase in profit booking rate adjustments was primarily due to a $100 million loss recognized on a classified program and an unfavorable profit adjustment on Hellfire in the first quarter of 2024 that did not recur, partially offset by lower favorable profit adjustments on PAC-3 in 2025.
Rotary and Mission Systems
Summary operating results for our RMS business segment were as follows (in millions):
| Quarters Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Sales | $ | 3,995 | $ | 4,548 | $ | 8,323 | $ | 8,636 | ||||||||||||||||||||||||||||||
| Operating (loss) profit | (172) | 495 | 349 | 925 | ||||||||||||||||||||||||||||||||||
| Operating margin | (4.3 | %) | 10.9 | % | 4.2 | % | 10.7 | % | ||||||||||||||||||||||||||||||
RMS’ sales during the quarter ended June 29, 2025 decreased $553 million, or 12%, compared to the same period in
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2024. The decrease was primarily attributable to lower net sales of $370 million on Sikorsky helicopter programs due to the unfavorable cumulative adjustments to sales driven by recognizing losses on CMHP and TUHP as previously described, and lower production volume on Seahawk programs; and a $145 million decrease on integrated warfare systems and sensors (IWSS) programs due to lower volume on radar and the CSC programs.
RMS’ operating profit during the quarter ended June 29, 2025 decreased $667 million, or 135%, compared to the same period in 2024. This decrease was attributable to a $610 million decrease in profit booking rate adjustments primarily due to a $570 million loss recognized on CMHP and a $95 million loss recognized on TUHP as previously described.
RMS’ sales during the six months ended June 29, 2025 decreased $313 million, or 4%, compared to the same period in 2024. The decrease was primarily attributable to lower net sales of $245 million on Sikorsky helicopter programs due to the unfavorable cumulative adjustments to sales driven by recognizing losses on CMHP and TUHP as previously described.
RMS’ operating profit during the six months ended June 29, 2025 decreased $576 million, or 62%, compared to the same period in 2024. This decrease was attributable to a $565 million decrease in profit booking rate adjustments primarily due to a $570 million loss recognized on CMHP and a $95 million loss recognized on TUHP as previously described, partially offset by unfavorable profit adjustments on Seahawk programs in the first quarter of 2024 that did not recur.
Space
Summary operating results for our Space business segment were as follows (in millions):
| Quarters Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | June 29, 2025 | June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Sales | $ | 3,307 | $ | 3,195 | $ | 6,512 | $ | 6,464 | ||||||||||||||||||||||||||||||
| Operating profit | 362 | 346 | 741 | 671 | ||||||||||||||||||||||||||||||||||
| Operating margin | 10.9 | % | 10.8 | % | 11.4 | % | 10.4 | % | ||||||||||||||||||||||||||||||
Space’s sales during the quarter ended June 29, 2025 increased $112 million, or 4%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $115 million for commercial civil space programs primarily due to higher volume on the Orion program; and $80 million for strategic and missile defense programs due to higher volume on NGI and Fleet Ballistic Missile (FBM) programs. These increases were partially offset by a decrease of $95 million on national security space programs due to program lifecycle on Next Gen OPIR system.
Space’s operating profit during the quarter ended June 29, 2025 increased $16 million, or 5%, compared to the same period in 2024. This increase was attributable to a $20 million increase in profit booking rate adjustments primarily due to favorable performance at completion on certain commercial civil space programs.
Space’s sales during the six months ended June 29, 2025 increased $48 million, or 1%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $190 million for commercial civil space programs primarily due to favorable performance at completion on certain commercial civil space programs and higher volume on the Orion program; and $90 million for strategic and missile defense programs due to higher volume on the NGI program. These increases were partially offset by a decrease of $250 million on national security space programs due to program lifecycle on Next Gen OPIR system.
Space’s operating profit during the six months ended June 29, 2025 increased $70 million, or 10%, compared to the same period in 2024. This increase was attributable to an $105 million increase in profit booking rate adjustments partially offset by $20 million of lower equity earnings driven by lower launch volume from our investment in United Launch Alliance (ULA). The increase in profit booking rate adjustments was primarily due to favorable performance at completion on certain commercial civil space programs.
Total equity earnings (ULA) represented approximately $10 million, or 3%, and $5 million, or 1%, of Space's operating profit during the quarter and six months ended June 29, 2025, compared to approximately $10 million, or 3%, and $25 million, or 4% for the same periods in 2024.
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FINANCIAL CONDITION
Liquidity and Capital Resources
At June 29, 2025, we had cash and cash equivalents of $1.3 billion that was generally available to fund ordinary business operations without significant legal, regulatory or other restrictions. Our principal source of liquidity is our cash from operations and access to credit markets. Access to credit markets includes our $3.0 billion revolving credit facility, including the ability to issue commercial paper. As of June 29, 2025, we had no borrowings outstanding under the revolving credit facility and $1.4 billion in commercial paper borrowings at a weighted average rate of 4.55%. As of December 31, 2024, there were no borrowings outstanding under the revolving credit facility or the commercial paper program. We may, as conditions warrant, continue to issue commercial paper backed by our revolving credit facility to manage the timing of cash flows.
Cash received from customers is our primary source of cash from operations. However, from time to time, we fund customer programs ourselves pending government appropriations. If we incur costs in excess of funds obligated on the contract or in advance of a contract award, this negatively affects our cash flows, and we may be at risk for reimbursement of the excess costs. In addition, when estimates of total costs to be incurred on a contract exceed total estimates of the transaction price, a provision for the entire loss is determined at the contract level and is recorded in the period in which the loss is evident, which we refer to as a reach-forward loss. These reach-forward losses do not have an immediate cash flow impact, but as future costs are incurred on these contracts, these losses will negatively impact cash flows over the remaining period of performance.
Additionally, increases in costs due to tariffs may impact our cash flows, as we may not be able to fully recover these costs, and even if recovery is possible, it may not occur in the same period as the incurred costs. See “Recent Developments in Trade and Regulatory Policies” included within the “Business Overview” discussion above.
Billing timetables and payment terms on our contracts vary based on a number of factors, including the contract type. We generally bill and collect cash more frequently under cost-reimbursable contracts, which represented approximately 41% of the sales we recorded during the six months ended June 29, 2025, as we are authorized to bill as the costs are incurred. A number of our fixed-price contracts may provide for performance-based payments, which allow us to bill and collect cash as we perform on the contract. The amounts of performance-based payments and the related milestones are determined in the negotiation of each contract. The timing of such payments may differ from the timing of the costs incurred related to our contract performance, thereby affecting our cash flows.
The U.S. Government has indicated that it would consider progress payments as the baseline for negotiating payment terms on fixed-price contracts, rather than performance-based payments. In contrast to negotiated performance-based payment terms, progress payment provisions correspond to a percentage of the amount of costs incurred during the performance of the contract and are invoiced regularly as costs are incurred. Our cash flows may be affected if the U.S. Government changes its payment policies. The U.S. Government from time to time withholds payments on certain of our billings based on contract terms or regulatory provisions. Ultimately, the impact of policy changes or withholding payments may delay the receipt of cash, but the cumulative amount of cash collected during the life of the contract should not vary.
We seek to maintain a disciplined and dynamic cash deployment strategy to invest in our business and key technologies to provide our customers with enhanced capabilities, enhance stockholder value, and position ourselves to take advantage of new business opportunities when they arise. Consistent with that strategy, we have continued to invest in our business and technologies through capital expenditures, independent research and development, and selective business acquisitions and investments.
We continue to return cash to stockholders through dividends and share repurchases. The remaining authorization under our share repurchase program was $8.1 billion as of June 29, 2025. The share repurchase program does not have an expiration date and may be amended or terminated by the Board of Directors at any time. The amount of shares ultimately purchased and the timing of purchases are at the discretion of management and subject to compliance with applicable law and regulation.
We continue to actively manage our debt levels, including maturities and interest rates. We seek to finance our business in a manner that preserves financial flexibility while minimizing borrowing costs to the extent practicable. We review changes in financial market and economic conditions to manage the types, amounts and maturities of our indebtedness. We may at times refinance existing indebtedness, vary our mix of variable-rate and fixed-rate debt or seek alternative financing sources or arrangements for our cash and operational needs.
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We also actively manage our pension obligations and expect to continue to opportunistically manage our pension liabilities through the purchase of group annuity contracts or other actions for portions of our outstanding defined benefit pension obligations using assets from the pension trust. Future transactions could be significant and result in us making additional contributions to the pension trust. The required funding of our qualified defined benefit pension plans is determined in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), as amended, and CAS. We could be required to make pension contributions earlier than and/or in excess of what was planned if our return on pension assets is less than our assumptions, which would reduce our free cash flow. We may also make additional contributions at our discretion.
The following table provides a summary of our cash flow information followed by a discussion of the key elements (in millions):
| Six Months Ended | ||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | |||||||||||||||||||
| Cash and cash equivalents at beginning of year | $ | 2,483 | $ | 1,442 | ||||||||||||||||
| Operating activities | ||||||||||||||||||||
| Net earnings | 2,054 | 3,186 | ||||||||||||||||||
| Noncash adjustments | 2,057 | 971 | ||||||||||||||||||
| Changes in working capital | (2,454) | (444) | ||||||||||||||||||
| Other, net | (47) | (202) | ||||||||||||||||||
| Net cash provided by operating activities | 1,610 | 3,511 | ||||||||||||||||||
| Net cash (used for) investing activities | (1,145) | (744) | ||||||||||||||||||
| Net cash (used for) financing activities | (1,655) | (1,686) | ||||||||||||||||||
| Net change in cash and cash equivalents | (1,190) | 1,081 | ||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 1,293 | $ | 2,523 | ||||||||||||||||
Operating Activities
Net cash provided by operating activities during the six months ended June 29, 2025 decreased $1.9 billion compared to the same period in 2024. The decrease in cash from operations was primarily due to an increase in working capital, which is defined as receivables, contract assets, and inventories less accounts payable and contract liabilities. This increase in working capital was driven by three main factors: an increase in contract assets as a result of the timing of milestones, primarily related to the F-35 program at Aeronautics; an increase in Sikorsky inventory at RMS; and decreases in contract liabilities related to classified programs at Aeronautics and national security space programs at Space. These increases were partially offset by favorable timing of cash payments related to accounts payable, primarily at Aeronautics.
Non-GAAP Financial Measure - Free Cash Flow
Free cash flow is a non-GAAP financial measure that we define as cash from operations less capital expenditures. Our capital expenditures are comprised of equipment and facilities infrastructure and information technology (inclusive of costs for the development or purchase of internal-use software that are capitalized). We use free cash flow to evaluate our business performance and overall liquidity, and is a performance goal in our annual and long-term incentive plans. We believe free cash flow is a useful measure for investors because it represents the amount of cash generated from operations after reinvesting in the business and that may be available to return to stockholders and creditors (through dividends, stock repurchases and debt repayments) or available to fund acquisitions and other investments. The entire amount of free cash flow is not necessarily available for discretionary expenditures, however, because it does not account for certain mandatory expenditures, such as the repayment of maturing debt and future pension contributions. While management believes that free cash flow as a non-GAAP financial measure may be useful in evaluating our financial
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performance and liquidity, it should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies.
The following table reconciles net cash provided by operating activities to free cash flow (in millions):
| Six Months Ended | ||||||||||||||||||||
| June 29, 2025 | June 30, 2024 | |||||||||||||||||||
| Cash from operations | $ | 1,610 | $ | 3,511 | ||||||||||||||||
| Capital expenditures | (805) | (748) | ||||||||||||||||||
| Free cash flow | $ | 805 | $ | 2,763 | ||||||||||||||||
Free cash flow during the six months ended June 29, 2025 decreased $2.0 billion compared to the same period in 2024 primarily due to operating cash flow drivers described above and higher software expenditures.
Investing Activities
Net cash used for investing activities during the six months ended June 29, 2025 increased $401 million compared to the same period in 2024, primarily due to a $360 million cash payment for the acquisition of Rapid Solutions. Capital expenditures totaled $805 million and $748 million during the six months ended June 29, 2025 and June 30, 2024. The majority of our capital expenditures are for equipment and facilities infrastructure that generally are incurred to support new and existing programs across all of our business segments. We also incur capital expenditures for information technology to support programs and general enterprise information technology infrastructure, inclusive of costs for the development or purchase of internal-use software.
Financing Activities
Net cash used for financing activities during the six months ended June 29, 2025 decreased $31 million compared to the same period in 2024.
During the six months ended June 29, 2025 and June 30, 2024, we paid dividends totaling $1.6 billion ($6.60 per share) and $1.5 billion ($6.30 per share).
During the six months ended June 29, 2025, we paid $1.3 billion to repurchase 2.7 million shares of our common stock. See “Note 9 - Stockholders’ Equity” included in our Notes to Consolidated Financial Statements for additional information. During the six months ended June 30, 2024, we paid $1.9 billion to repurchase 4.2 million shares of our common stock.
During the six months ended June 29, 2025, we received net proceeds of $1.4 billion from the issuance of commercial paper.
During the six months ended June 29, 2025 and June 30, 2024, we repaid $142 million and $168 million of long-term notes with a fixed interest rate of 7.625% and 8.375% according to their scheduled maturities.
OTHER MATTERS
Status of the F-35 Program
The F-35 program primarily consists of production contracts, sustainment activities, and new development efforts. Production of the aircraft is expected to continue for many decades given the U.S. Government’s objective of procuring and sustaining 2,456 aircraft for the U.S. Air Force, U.S. Marine Corps, and U.S. Navy. We also have commitments from seven international partner countries and 12 FMS customers. We continue to see strong international demand for the F-35. In February 2025, Singapore signed an LOA for eight F-35As, adding to their prior program of record of 12 F-35Bs. In June 2025, the United Kingdom announced its intent to purchase 12 F-35As adding to its existing fleet of F-35Bs. We expect international interest to continue to expand in the coming years.
During the second quarter of 2025, we delivered 50 aircraft. Since the program inception through June 29, 2025, we delivered 1,199 production F-35 aircraft, including 866 F-35A variants, 221 F-35B variants and 112 F-35C variants, and our backlog as of that date was 311 aircraft, demonstrating the F-35 program’s continued progress and longevity.
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In December 2024, Lockheed Martin and the Joint Program Office (JPO) reached an agreement for an undefinitized contract action for Lot 18 F-35 Air Vehicle Production Contract for 145 aircraft. The scope includes aircraft for the U.S. Air Force, Navy, and Marines and the International Partners and Foreign Military Sales (FMS) customers, in addition to the required infrastructure for the international Final Assembly and Checkout Facilities (FACOs) and other equipment. Lot 19 was negotiated concurrently with Lot 18, and both Lots are expected to be fully awarded in 2025.
The F-35 program is significant and complex, and we and our customers continually review aircraft performance, program and delivery schedule, cost and supply chain issues, and requirements as part of our internal program management efforts and the DoD, Congressional and international countries’ oversight and budgeting processes. Areas of particular focus currently include Lockheed Martin’s and supplier performance, Block 4 modernization, flight test execution, cost of life cycle operations, sustainment, inflation-related cost and supply chain-related cost and schedule pressures, and efforts to increase affordability and readiness.
As previously disclosed, deliveries of F-35 aircraft were put on hold in the first half of 2024 due to technology insertion delays in the Lot 15-17 contract. Deliveries resumed in July 2024 after reaching agreement with JPO on a phased approach to inserting such capabilities into the aircraft including timing of the final delivery payments and related withhold liquidations. We continue to make progress on delivering capability while enhancing the air dominance of the F-35 through on-going Block 4 development.
Contingencies
See “Note 7 - Legal Proceedings and Contingencies” included in our Notes to Consolidated Financial Statements for information regarding our contingent obligations, including off-balance sheet arrangements.
Critical Accounting Policies
There have been no significant changes to the critical accounting policies disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2024 Form 10-K.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
As disclosed in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our 2024 Form 10-K, we transact business globally and are subject to risks associated with changing foreign currency exchange rates. We enter into foreign currency hedges such as forward and option contracts that change in value as foreign currency exchange rates change. Our exposures to market risk have not changed materially since December 31, 2024. See “Note 8 - Fair Value Measurements” included in our Notes to Consolidated Financial Statements for additional discussion.
ITEM 4. Controls and Procedures
We performed an evaluation of the effectiveness of our disclosure controls and procedures as of June 29, 2025. The evaluation was performed with the participation of senior management of each business segment and key corporate functions, under the supervision of the Chief Executive Officer (CEO) and Chief Financial Officer (CFO). Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were operating and effective as of June 29, 2025.
There were no changes in our internal control over financial reporting during the quarter ended June 29, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Forward-Looking Statements
This Form 10-Q contains statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements within the meaning of the federal securities laws, and are based on our current expectations and assumptions. The words “believe,” “estimate,” “anticipate,” “project,” “intend,” “expect,” “plan,” “outlook,” “scheduled,” “forecast” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially due to factors such as:
•our reliance on contracts with the U.S. Government, which are dependent on U.S. Government funding and can be terminated for convenience, and our ability to negotiate favorable contract terms;
•budget uncertainty, the risk of future budget cuts, the impact of continuing resolution funding mechanisms, the debt ceiling and the potential for government shutdowns, and changing funding and acquisition priorities;
•risks related to the development, production, sustainment, performance, schedule, cost and requirements of complex and technologically advanced programs, including the F-35 program;
•planned production rates and orders for significant programs, compliance with stringent performance and reliability standards, and materials availability, including government furnished equipment and rare earth minerals;
•the timing of contract awards or contract definitization, decisions by government customers to impose contract terms following undefinitized contract actions, achievement of performance milestones, customer acceptance of product deliveries, and receipt of customer payments;
•our ability to recover costs under U.S. Government contracts and the mix of fixed-price and cost-reimbursable contracts;
•customer procurement and other policies, laws, regulations and executive actions that affect our and our industry’s, programs, future opportunities, and financial performance, including those relating to mission priorities, competing domestic and international spending, contracting terms (such as fixed-price requirements), treatment of contractor performance issues, and contractor access to competitive opportunities;
•performance and/or financial viability of key suppliers, teammates, joint ventures (including United Launch Alliance), joint venture partners, subcontractors and customers;
•economic, industry, business and political conditions including their effects on governmental policy;
•the impact of inflation and other cost pressures;
•government actions that restrict or prevent the sale or delivery of our products (such as delays in approvals for exports requiring Congressional notification);
•foreign policy and international trade actions taken by governments such as tariffs, sanctions, embargoes, export and import controls, buying preferences, and other trade restrictions;
•our success expanding into and doing business in adjacent markets and internationally and the risks posed by international sales, including potential effects from fluctuations in currency exchange rates;
•changes in non-U.S. national priorities and government budgets and planned orders;
•the competitive environment for our products and services;
•our ability to develop and commercialize new technologies and products, including emerging digital and network technologies and capabilities;
•our ability to benefit fully from or adequately protect our intellectual property rights;
•our ability to attract and retain a highly skilled workforce and the impact of work stoppages or other labor disruptions;
•cyber or other security threats or other disruptions faced by us or our suppliers;
•our ability to implement and continue, and the timing and impact of, capitalization changes such as share repurchases, dividend payments and financing transactions;
•the accuracy of our estimates and projections;
•changes in pension plan assumptions and actual returns on pension assets; cash funding requirements and pension annuity contracts and associated settlement charges;
•realizing the anticipated benefits of acquisitions or divestitures, investments, joint ventures, teaming arrangements or internal reorganizations, and market volatility affecting the fair value of investments that are marked to market;
•our efforts to increase the efficiency of our operations and improve the affordability of our products and services, including through digital transformation and cost reduction initiatives;
•the risk of an impairment of our assets, including the potential impairment of goodwill and intangibles;
•the availability and adequacy of our insurance and indemnities;
•compliance with laws, regulations, policies, and customer requirements relating to environmental matters;
•the impact of public health crises, natural disasters and other severe weather conditions on our business and financial results, including supply chain disruptions and delays, employee absences, and program delays;
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•changes in accounting, U.S. or foreign tax, export or other laws, regulations, and policies and their interpretation or application, and changes in the amount or reevaluation of uncertain tax positions; and
•the outcome of legal proceedings, bid protests, environmental remediation efforts, audits, administrative reviews, government investigations or government allegations that we have failed to comply with law, other contingencies and U.S. Government identification of deficiencies in our business systems.
These are only some of the factors that may affect the forward-looking statements contained in this Form 10-Q. For a discussion identifying additional important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, see our filings with the U.S. Securities and Exchange Commission (SEC) including, but not limited to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in our 2024 Form 10-K and subsequent Quarterly Reports on Form 10-Q. Our filings may be accessed through the Investor Relations page of our website, www.lockheedmartin.com/investor, or through the website maintained by the SEC at www.sec.gov. Information contained on or made available through our website or other websites mentioned in this Form 10-Q is not incorporated into and is not a part of this Form 10-Q, and any references to our website are intended to be inactive textual references only.
Our actual financial results likely will be different from those projected due to the inherent nature of projections. Given these uncertainties, forward-looking statements should not be relied on in making investment decisions. The forward-looking statements contained in this Form 10-Q speak only as of the date of our filing. Except where required by applicable law, we expressly disclaim a duty to provide updates to forward-looking statements after the date of this Form 10-Q to reflect subsequent events, changed circumstances, changes in expectations, or the estimates and assumptions associated with them. The forward-looking statements in this Form 10-Q are intended to be subject to the safe harbor protection provided by the federal securities laws.
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
We are a party to litigation and other proceedings that arise in the ordinary course of our business, including matters arising under provisions relating to the protection of the environment, and are subject to contingencies related to certain businesses we previously owned. These types of matters could result in fines, penalties, cost reimbursements or contributions, compensatory or treble damages or non-monetary sanctions or relief. We believe the probability is remote that the outcome of each of these matters will have a material adverse effect on the company as a whole, notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings and cash flows in any particular reporting period. We cannot predict the outcome of legal or other proceedings with certainty.
We are subject to federal, state, local and foreign requirements for the protection of the environment, including those for discharge of hazardous materials and remediation of contaminated sites. Due in part to the complexity and pervasiveness of these requirements, we are a party to or have property subject to various lawsuits, proceedings and remediation obligations. The extent of our financial exposure cannot in all cases be reasonably estimated at this time.
For more information regarding matters referred to above, including current estimates of the amounts that we believe are required for remediation or clean-up to the extent estimable, see “Note 7 - Legal Proceedings and Contingencies — Legal Proceedings and Environmental Matters” included in our Notes to Consolidated Financial Statements in this Form 10-Q, which is hereby incorporated by reference. For additional information and a description of previously reported matters, see also “Critical Accounting Policies – Environmental Matters” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 14 – Legal Proceedings, Commitments and Contingencies,” in our 2024 Form 10-K.
ITEM 1A. Risk Factors
There have been no material changes to the risk factors disclosed in Part I, Item 1A, “Risk Factors” of our 2024 Form 10-K. These risks and uncertainties described in our risk factors have the potential to materially affect our business, results of operations, financial condition, cash flows, projected results and future prospects. These risks are not exclusive and additional risks to which we are subject include the factors mentioned under “Forward-Looking Statements” and the risks described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q.
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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no sales of unregistered equity securities during the quarter ended June 29, 2025.
The following table provides information about our repurchases of our common stock that is registered pursuant to Section 12 of the Securities Exchange Act of 1934 during the quarter ended June 29, 2025.
Period (a) | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b) | Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (b) | |||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
March 31, 2025 – April 27, 2025 (c) | 51,130 | $ | 469.38 | 51,130 | $ | 8,549 | |||||||||||||||||||||||||||||
April 28, 2025 – May 25, 2025 (c) | 558,151 | $ | 469.65 | 558,093 | $ | 8,287 | |||||||||||||||||||||||||||||
May 26, 2025 – June 29, 2025 (c) | 457,838 | $ | 467.18 | 457,833 | $ | 8,073 | |||||||||||||||||||||||||||||
Total (c) | 1,067,119 | $ | 468.58 | 1,067,056 | |||||||||||||||||||||||||||||||
(a)We close our books and records on the last Sunday of each month to align our financial closing with our business processes, except for the month of December, as our fiscal year ends on December 31. As a result, our fiscal months often differ from the calendar months. For example, June 29, 2025 was the last day of our June 2025 fiscal month.
(b)In October 2010, our Board of Directors approved and on October 25, 2010 we announced a share repurchase program pursuant to which we are authorized to repurchase our common stock in privately negotiated transactions or in the open market at prices per share not exceeding the then-current market prices. From time to time, our Board of Directors authorizes increases to our share repurchase program. The total remaining authorization for future common share repurchases under our share repurchase program was $8.1 billion as of June 29, 2025. Under the program, management has discretion to determine the dollar amount of shares to be repurchased and the timing of any repurchases in compliance with applicable law and regulation. This includes purchases pursuant to Rule 10b5-1 plans, including accelerated share repurchases. The program does not have an expiration date.
(c)During the quarter ended June 29, 2025, the total number of shares purchased included 63 shares that were transferred to us by employees in satisfaction of tax withholding obligations associated with the vesting of restricted stock units. These purchases were made pursuant to a separate authorization by our Board of Directors and are not included within the program.
ITEM 5. Other Information
None of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarter ended June 29, 2025.
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ITEM 6. Exhibits
| Exhibit No. | Description | |||||||
| 10.1 | Amendment No. 6 to Lockheed Martin Corporation Executive Severance Plan, as amended and restated effective December 1, 2016 | |||||||
| 15 | Acknowledgment of Independent Registered Public Accounting Firm | |||||||
| 31.1 | Certification of James D. Taiclet pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||
| 31.2 | Certification of Evan T. Scott pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||
| 32 | Certification of James D. Taiclet and Evan T. Scott pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document contained in Exhibit 101 | |||||||
49
Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Lockheed Martin Corporation | ||||||||
| (Registrant) | ||||||||
| Date: July 22, 2025 | By: /s/ H. Edward Paul III | |||||||
| H. Edward Paul III | ||||||||
| Vice President and Controller | ||||||||
| (Duly Authorized Officer and Chief Accounting Officer) | ||||||||
50
FAQ
What did Ikena Oncology (IKNA) announce in its July 22 2025 8-K?
The board declared a special dividend of one contingent value right for each IKNA share.
When is the record date for the IKNA CVR dividend?
Shareholders must own IKNA common stock by the close of business on 24 Jul 2025.
How much could the IKNA CVR be worth?
Value depends on future milestone, royalty or earn-out proceeds; no minimum payment is assured.
Why is Ikena issuing CVRs ahead of the Inmagene merger?
The CVRs dedicate potential proceeds from legacy asset dispositions to current shareholders while the company combines with Inmagene.
What risks could prevent CVR holders from being paid?
Risks include failure to close the merger, inability to sell assets, unmet milestones, litigation and added costs reducing net proceeds.
How are CVR proceeds allocated between pre- and post-merger asset sales?
Holders receive 100% of net proceeds from pre-merger asset deals and 90% of net proceeds from eligible post-merger deals within one year.
Lockheed Martin
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