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Item 1. Financial Statements

2024-10-22 compared with 2024-07-23 · 170 added, 161 removed, 629 unchanged (34% of the section changed)

3 unchanged sentences

in millions, except per share data)

Quarters Ended Six Months Ended

2024 June 25,

2023 June 30,

2024 June 25,

Quarters Ended Nine Months Ended

September 29,

2024 September 24,

2023 September 29,

2024 September 24,

Products $ 14,472 $ 14,014 $ 43,777 $ 40,298

8 unchanged sentences

Gross profit 2,117 2,048 6,240 6,184

Other income, net 18 45 54 36

Other income (expense), net 23 ( 6 ) 77 30

Operating profit 2,140 2,042 6,317 6,214

1 unchanged sentence

Non-service FAS pension income 16 111 47 332

Other non-operating income (expense), net 46 ( 17 ) 91 32

Other non-operating income, net 18 37 109 69

Earnings before income taxes 1,918 1,953 5,701 5,953

8 unchanged sentences

Consolidated Statements of Comprehensive Income

Quarters Ended Six Months Ended

2024 June 25,

2023 June 30,

2024 June 25,

Quarters Ended Nine Months Ended

September 29,

2024 September 24,

2023 September 29,

2024 September 24,

Net earnings $ 1,623 $ 1,684 $ 4,809 $ 5,054

1 unchanged sentence

Postretirement benefit plans

Amortization of actuarial losses and prior service credits, net of tax of $ 5 million and $ 10 million in 2024 and $ 10 million and $ 20 million in 2023

Amortization of actuarial losses and prior service credits, net of tax expense of $ 6 million and $ 16 million in 2024 and $ 10 million and $ 30 million in 2023

19 ( 37 ) 57 ( 111 )

Other, net, net of tax of $ 8 million in 2024 and $ 4 million and $ 8 million in 2023

Other, net, net of tax benefits of $ 3 million and expense of $ 5 million in 2024 and expense of $ 5 million and $ 4 million in 2023

57 ( 30 ) 53 ( 12 )

5 unchanged sentences

(in millions, except par value)

September 29,

2024 December 31,

34 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended

2024 June 25,

Nine Months Ended

September 29,

2024 September 24,

Operating activities

32 unchanged sentences

Consolidated Statements of Equity

For the Quarters Ended June 30, 2024 and June 25, 2023

For the Quarters Ended September 29, 2024 and September 24, 2023

Stock Additional

2 unchanged sentences

Comprehensive

Balance at March 31, 2024 $ 239 $ — $ 15,222 $ ( 8,811 ) $ 6,650

Balance at June 30, 2024 $ 237 $ — $ 14,707 $ ( 8,769 ) $ 6,175

Net earnings — — 1,623 — 1,623

3 unchanged sentences

Stock-based awards, ESOP activity and other 1 171 — — 172

Balance at September 29, 2024 $ 236 $ — $ 15,657 $ ( 8,693 ) $ 7,200

Balance at June 25, 2023 $ 251 $ — $ 17,068 $ ( 8,079 ) $ 9,240

Balance at March 26, 2023 $ 254 $ — $ 17,478 $ ( 8,086 ) $ 9,646

Net earnings — — 1,684 — 1,684

Other comprehensive income, net of tax — — — 7 7

Other comprehensive loss, net of tax — — — ( 67 ) ( 67 )

Dividends declared — — 11 — 11

1 unchanged sentence

Stock-based awards, ESOP activity and other — 156 — — 156

Balance at June 25, 2023 $ 251 $ — $ 17,068 $ ( 8,079 ) $ 9,240

Balance at September 24, 2023 $ 247 $ 107 $ 17,066 $ ( 8,146 ) $ 9,274

The accompanying notes are an integral part of these unaudited consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Equity

For the Six Months Ended June 30, 2024 and June 25, 2023

For the Nine Months Ended September 29, 2024 and September 24, 2023

Stock Additional

5 unchanged sentences

Other comprehensive income, net of tax

— — — 110 110

Dividends declared — — ( 2,273 ) — ( 2,273 )

2 unchanged sentences

2 417 — — 419

Balance at June 30 2024 $ 237 $ — $ 14,707 $ ( 8,769 ) $ 6,175

Balance at September 29 2024 $ 236 $ — $ 15,657 $ ( 8,693 ) $ 7,200

Balance at December 31, 2022 $ 254 $ 92 $ 16,943 $ ( 8,023 ) $ 9,266

Net earnings — — 5,054 — 5,054

Other comprehensive income, net of tax

— — — ( 56 ) ( 56 )

Other comprehensive loss, net of tax — — — ( 123 ) ( 123 )

Dividends declared — — ( 2,280 ) — ( 2,280 )

2 unchanged sentences

1 356 — — 357

Balance at June 25 2023 $ 251 $ — $ 17,068 $ ( 8,079 ) $ 9,240

Balance at September 24, 2023 $ 247 $ 107 $ 17,066 $ ( 8,146 ) $ 9,274

The accompanying notes are an integral part of these unaudited consolidated financial statements.

19 unchanged sentences

We eliminate intercompany balances and transactions in consolidation.

We close our books and records on the last Sunday of the interim calendar quarter, which was on June 30 for the second quarter of 2024 and June 25 for the second quarter of 2023, to align our financial closing with our business processes.

We close our books and records on the last Sunday of each interim calendar quarter, which was on September 29 for the third quarter of 2024 and September 24 for the third quarter of 2023, 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 as our fiscal year ends on December 31.

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.

3 unchanged sentences

The weighted average number of shares outstanding used to compute earnings per common share were as follows (in millions):

Quarters Ended Six Months Ended

2024 June 25,

2023 June 30,

2024 June 25,

Quarters Ended Nine Months Ended

September 29,

2024 September 24,

2023 September 29,

2024 September 24,

Weighted average common shares outstanding for basic computations 237.5 249.3 239.0 252.2

5 unchanged sentences

Our calculation of diluted earnings per common share also includes the dilutive effects for the assumed vesting of outstanding restricted stock units (RSUs) and performance stock units (PSUs) based on the treasury stock method.

There were no significant anti-dilutive equity awards during the quarters and six months ended June 30, 2024 and June 25, 2023.

There were no significant anti-dilutive equity awards during the quarters and nine months ended September 29, 2024 and September 24, 2023.

Basic and diluted weighted average common shares outstanding decreased in 2024 compared to 2023 due to share repurchases.

10 unchanged sentences

Summary operating results for each of our business segments were as follows (in millions):

Quarters Ended Six Months Ended

2024 June 25,

2023 June 30,

2024 June 25,

Quarters Ended Nine Months Ended

September 29,

2024 September 24,

2023 September 29,

2024 September 24,

Aeronautics $ 6,487 $ 6,717 $ 20,609 $ 19,861

12 unchanged sentences

Impairment and severance charges (a)

( 87 ) — ( 87 ) —

Intangible asset amortization expense ( 61 ) ( 61 ) ( 183 ) ( 185 )

Other, net ( 152 ) ( 74 ) ( 213 ) ( 72 )

( 75 ) ( 121 ) ( 288 ) ( 193 )

Total unallocated items 270 232 660 867

6 unchanged sentences

Total intersegment sales $ 998 $ 854 $ 2,907 $ 2,455

(a) Impairment and severance charges of $ 87 million ($ 69 million, or $ 0.29 per share, after-tax) include trademark and fixed asset impairments as well as severance c osts.

(a) Impairment and severance charges of $ 87 million ($ 69 million, or $ 0.29 per share, after-tax) include trademark and fixed asset impairments as well as severance c osts recorded in the second quarter of 2024.

See “Note 10 - Other” below for additional information.

Unallocated Items

Business segment operating profit excludes the FAS/CAS pension operating adjustment, 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

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

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.

Unallocated Items

Business segment operating profit excludes the FAS/CAS pension operating adjustment discussed 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.

Excluded items are included in the reconciling item “Unallocated items” between operating profit from our business segments and our consolidated operating profit.

1 unchanged sentence

FAS/CAS Pension Operating Adjustment

Our business segments’ results of operations include pension expense only as calculated under U.S.

Government Cost Accounting Standards (CAS), which we refer to as CAS pension cost.

Our business segments’ results of operations include pension expense only 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 of our business segment’s net sales and cost of sales.

Government contracts and, therefore, recognize CAS pension cost in each of our business segments’ net sales and cost of sales.

Our consolidated financial statements must present pension and other postretirement benefit plan income calculated in accordance with Financial Accounting Standards (FAS) requirements under U.S.

6 unchanged sentences

Net sales by products and services, contract type, customer, and geographic region were as follows (in millions):

Quarter Ended June 30, 2024

Quarter Ended September 29, 2024

Aeronautics MFC RMS Space Total

19 unchanged sentences

Total net sales $ 6,487 $ 3,175 $ 4,367 $ 3,075 $ 17,104

Six Months Ended June 30, 2024

Nine Months Ended September 29, 2024

Aeronautics MFC RMS Space Total

21 unchanged sentences

Notes to Consolidated Financial Statements (unaudited) (continued)

Quarter Ended June 25, 2023

Quarter Ended September 24, 2023

Aeronautics MFC RMS Space Total

19 unchanged sentences

Total net sales $ 6,717 $ 2,939 $ 4,121 $ 3,101 $ 16,878

Six Months Ended June 25, 2023

Nine Months Ended September 24, 2023

Aeronautics MFC RMS Space Total

21 unchanged sentences

Government and direct commercial sales to international governments and other international customers.

Our Aeronautics business segment includes our largest program, the F-35 Lightning II, an international multi-role, multi-variant, stealth fighter aircraft.

Net sales for the F-35 program represented approximately 26 % and 25 % of our total

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

consolidated net sales for the quarter and six months ended June 30, 2024 and 26 % of our total consolidated net sales for both the quarter and six months ended June 25, 2023.

Our Aeronautics business segment includes our largest program, the F-35 Lightning II, an international multi-role, multi-variant, stealth fighter aircraft.

Net sales for the F-35 program represented approximately 22 % and 24 % of our total consolidated net sales for the quarter and nine months ended September 29, 2024 and 26 % of our total consolidated net sales for both the quarter and nine months ended September 24, 2023.

Total assets for each of our business segments were as follows (in millions):

September 29,

2024 December 31,

11 unchanged sentences

Contract assets and contract liabilities were as follows (in millions):

September 29,

2024 December 31,

1 unchanged sentence

Contract liabilities 9,051 9,190

Contract assets increased $ 724 million during the six months ended June 30, 2024, due to the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations during the six months ended June 30, 2024 for which we have not yet billed our customers.

There were no significant credit or impairment losses related to our contract assets during the quarters and six months ended June 30, 2024 and June 25, 2023.

Contract liabilities decreased $ 9 million during the six months ended June 30, 2024, primarily due to revenue recognized in excess of payments received on these performance obligations.

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.

During the quarter and six months ended June 25, 2023, we recognized $ 1.1 billion and $ 3.3 billion of our contract liabilities at December 31, 2022 as revenue.

Contract assets increased $ 1.0 billion during the nine months ended September 29, 2024, due to the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations during the nine months ended September 29, 2024 for which we have not yet billed our customers.

There were no significant credit or impairment losses related to our contract assets during the quarters and nine months ended September 29, 2024 and September 24, 2023.

Contract liabilities decreased $ 139 million during the nine months ended September 29, 2024, primarily due to revenue recognized in excess of payments received on performance obligations.

During the quarter and nine months ended September 29, 2024, we recognized $ 866 million and $ 4.9 billion of our contract liabilities at December 31, 2023 as revenue.

During the quarter and nine months ended September 24, 2023, we recognized $ 916 million and $ 4.2 billion of our contract liabilities at December 31, 2022 as revenue.

Lockheed Martin Corporation

2 unchanged sentences

Inventories consisted of the following (in millions):

September 29,

2024 December 31,

7 unchanged sentences

All other pre-contract costs, including start-up costs, are expensed as incurred.

As of June 30, 2024 and December 31, 2023, $ 1.2 billion and $ 989 million of pre-contract costs (primarily the F-35 program and classified contracts at our Aeronautics business segment) were included in inventories.

As of September 29, 2024 and December 31, 2023, $ 1.9 billion and $ 989 million of pre-contract costs (primarily the F-35 program and classified contracts at our Aeronautics business segment) were included in inventories.

The increase in pre-contract costs as of September 29, 2024 is primarily driven by the F-35 program, specifically delays in receiving additional contractual authorization and funding for the Lots 18-19 contract.

Lockheed Martin Corporation

2 unchanged sentences

The pretax FAS income related to our qualified defined benefit pension plans and retiree medical and life insurance plans consisted of the following (in millions):

Quarters Ended Six Months Ended

2023 June 30,

Quarters Ended Nine Months Ended

September 29,

2024 September 24,

2023 September 29,

2024 September 24,

Qualified defined benefit pension plans

19 unchanged sentences

and the non-service components of our FAS income for our retiree medical and life insurance plans as part of the other non-operating income, net account on our consolidated statements of earnings.

The amortization of net actuarial losses or gains and prior service credits or costs in the table above, along with similar costs related to our other postretirement benefit plans ($ 4 million and $ 8 million for the quarter and six months ended June 30, 2024 and $ 4 million and $ 7 million for the quarter and six months ended June 25, 2023) were reclassified from accumulated other comprehensive loss (AOCL) and recorded as a component of FAS income for the periods presented.

These costs totaled $ 24 million ($ 19 million, net of tax) and $ 48 million, ($ 38 million, net of tax) during the quarter and six months ended June 30, 2024, and $( 47 ) million ($( 37 ) million, net of tax) and $( 94 ) million ($( 74 ) million, net of tax) during the quarter and six months ended June 25, 2023.

These costs totaled $ 25 million ($ 19 million, net of tax) and $ 73 million ($ 57 million, net of tax) during the quarter and nine months ended September 29, 2024, and $( 47 ) million ($( 37 ) million, net of tax) and $( 141 ) million ($( 111 ) million, net of tax) during the quarter and nine months ended September 24, 2023.

Funding Requirements

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 contributions to our qualified defined benefit pension plans during the quarters and six months ended June 30, 2024 and June 25, 2023.

We made no contributions to our qualified defined benefit pension plans during the quarters and nine months ended September 29, 2024 and September 24, 2023.

Lockheed Martin Corporation

4 unchanged sentences

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 any particular interim reporting period.

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.

3 unchanged sentences

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.

United States of America, ex rel.

Sikorsky Aircraft Corp., et al.

As a result of our acquisition of Sikorsky Aircraft Corporation (Sikorsky) in 2015, we assumed the defense of and any potential liability for two civil False Claims Act lawsuits pending in the U.S.

District Court for the Eastern District of Wisconsin.

In October 2014, the U.S.

Government filed a complaint in intervention in the first suit, which was brought by qui tam relator Mary Patzer, a former Derco Aerospace (Derco) employee.

In May 2017, the U.S.

Government filed a complaint in intervention in a second suit, which was brought by qui tam relator Peter Cimma, a former Sikorsky Support Services, Inc.

(SSSI) employee.

In November 2017, the Court consolidated the cases into a single action for discovery and trial.

Government alleged that Sikorsky and two of its wholly-owned subsidiaries, Derco and SSSI, violated the civil False Claims Act and the Truth in Negotiations Act in connection with a contract the U.S.

Navy awarded to SSSI in June 2006 to support the Navy’s T-34 and T-44 fixed-wing turboprop training aircraft.

SSSI subcontracted with Derco, primarily to procure and manage spare parts for the training aircraft.

Government contended that SSSI overbilled the Navy on the contract as the result of Derco’s use of prohibited cost-plus-percentage-of-cost (CPPC) pricing to add profit and overhead costs as a percentage of the price of the spare parts that Derco procured and then sold to SSSI.

Government also alleged that Derco’s claims to SSSI, SSSI’s claims to the Navy, and SSSI’s yearly Certificates of Final Indirect Costs from 2006 through 2012 were false and that SSSI submitted inaccurate cost or pricing data in violation of the Truth in Negotiations Act for a sole-sourced, follow-on “bridge” contract.

Government’s complaints asserted common law claims for breach of contract and unjust enrichment.

On November 29, 2021, the District Court granted the U.S.

Government’s motion for partial summary judgment, finding that the Derco-SSSI agreement was a CPPC contract.

On October 17, 2023, the District Court ruled on the parties’ cross motions for summary judgment, granting some motions and denying others.

Trial on the U.S.

Government’s remaining claims was scheduled for May 6, 2024 before being stayed pending negotiation of a settlement agreement.

On June 21, 2024, SSSI and Derco settled with the U.S.

Government and relator to avoid the delay, uncertainty, inconvenience and expense of further protracted litigation.

Under the terms of the settlement, we paid $ 70 million to the U.S.

Government with no admission of liability or finding of wrongdoing, resulting in an immaterial charge to earnings in the quarter ending June 30, 2024 for the portion of the settlement payment in excess of the previously estimated liability.

The alleged conduct at issue in the lawsuit occurred between 2006 and 2012, prior to our acquisition of Sikorsky.

The case was dismissed on July 3, 2024, as a result of the settlement agreement.

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Lockheed Martin v.

10 unchanged sentences

We continue to await a decision from the District Court.

Although this matter relates to our former Information Systems & Global Solutions (IS&GS) business, we retained responsibility for the litigation when we divested IS&GS in 2016.

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

7 unchanged sentences

Government business base and contract mix, and our history of receiving reimbursement of such costs.

We include the portions of those environmental costs expected to be allocated to our non-U.S.

We include the portions of those

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

environmental costs expected to be allocated to our non-U.S.

Government contracts, or determined not to be recoverable under U.S.

Government contracts, in our cost of sales at the time the liability is established or adjusted.

At June 30, 2024 and December 31, 2023, the aggregate amount of liabilities recorded relative to environmental matters was $ 687 million and $ 680 million, 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 $ 620 million and $ 613 million at June 30, 2024 and December 31, 2023, most of which are recorded in other noncurrent assets on our consolidated balance sheets.

At September 29, 2024 and December 31, 2023, the aggregate amount of liabilities recorded relative to environmental matters was $ 697 million and $ 680 million, 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 $ 628 million and $ 613 million at September 29, 2024 and December 31, 2023, most of which are recorded in other noncurrent assets on our consolidated balance sheets.

Environmental remediation activities usually span many years, which makes estimating liabilities a matter of judgment because of uncertainties with respect to assessing the extent of the contamination as well as such factors as changing remediation technologies and changing regulatory environmental standards.

7 unchanged sentences

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

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

agreements relating to soil, groundwater, sediment, or surface water contamination at certain sites of former or current operations.

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.

1 unchanged sentence

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 substantially lower cleanup standards are adopted for perchlorate or for 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.

If substantially lower cleanup standards are adopted for 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.

7 unchanged sentences

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 $ 2.8 billion and $ 2.9 billion at June 30, 2024 and December 31, 2023.

We had total outstanding letters of credit and surety bonds aggregating $ 2.7 billion and $ 2.9 billion at September 29, 2024 and December 31, 2023.

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Additionally, we may guarantee the contractual performance of third parties such as joint venture partners.

At June 30, 2024 and December 31, 2023, third-party guarantees totaled $ 347 million and $ 1.0 billion, of which approximately 26 % and 75 % related to guarantees of contractual performance of joint ventures to which we currently are or previously were a party.

At September 29, 2024 and December 31, 2023, third-party guarantees totaled $ 313 million and $ 1.0 billion, of which approximately 21 % and 75 % 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.

2 unchanged sentences

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 30, 2024 and December 31, 2023, there were no material amounts recorded in our financial statements related to third-party guarantees or novation agreements.

At September 29, 2024 and December 31, 2023, there were no material amounts recorded in our financial statements related to third-party guarantees or novation agreements.

Other Contingencies

On April 22, 2024, the Armed Services Board of Contract Appeals (ASBCA) sustained our appeal associated with a contract to modernize and install new engines in C-5 Galaxy aircraft.

On April 22, 2024, the Armed Services Board of Contract Appeals (ASBCA) sustained our claim associated with a contract to modernize and install new engines in C-5 Galaxy aircraft.

The ASBCA ruled that we are entitled to $ 132 million for impacts due to excessive “over and above” work performed under the contract plus interest on the amount since the date of our claim in October 2018.

We have not recognized the impacts resulting from the ASBCA decision through June 30, 2024, given the matter may be appealed by the Government until August 21, 2024, and the uncertain grounds for any potential appeal.

On August 27, 2024, the Department of Justice filed a notice of appeal of the ASBCA’s decision with the U.S.

Court of Appeals for the Federal Circuit.

On the anticipated basis of the Government’s appeal, we have recognized approximately $ 85 million of sales and operating profit during the quarter ended September 29, 2024, which we believe is probable of collection and subject to change based on developments during the pending appeal process in Federal Circuit Court and as interest accrues.

Independent of this matter and as a U.S.

4 unchanged sentences

Suspension or debarment could have a material adverse effect on us because of our dependence on contracts with the U.S.

Government investigations often take years to complete and

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

many result in no adverse action against us.

We also provide products and services to customers outside of the U.S., which are subject to 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.

5 unchanged sentences

Warranty obligations incurred in connection with long-term production contracts are accounted for within the contract estimates at completion.

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

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 30, 2024 December 31, 2023

September 29, 2024 December 31, 2023

Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3

25 unchanged sentences

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.

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

The aggregate notional amount of our outstanding interest rate swaps was $ 1.3 billion at both June 30, 2024 and December 31, 2023.

The aggregate notional amount of our outstanding foreign currency hedges was $ 6.1 billion and $ 6.5 billion at June 30, 2024 and December 31, 2023.

The fair values of our outstanding interest rate swaps and foreign currency hedges at June 30, 2024 and December 31, 2023 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 30, 2024 and June 25, 2023.

The aggregate notional amount of our outstanding interest rate swaps was $ 1.3 billion at both September 29, 2024 and December 31, 2023.

The aggregate notional amount of our outstanding foreign currency hedges was $ 6.3 billion and $ 6.5 billion at September 29, 2024 and December 31, 2023.

The fair values of our outstanding interest rate swaps and foreign currency hedges at September 29, 2024 and December 31, 2023 were not significant.

Derivative instruments did not have a material impact on net earnings and comprehensive income during the quarters and nine months ended September 29, 2024 and September 24, 2023.

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.

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

In addition to the financial instruments listed in the table above, we hold other financial instruments, including cash and cash equivalents, receivables, accounts payable 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 was $ 19.3 billion and $ 18.5 billion at June 30, 2024 and December 31, 2023.

The outstanding principal amount of debt, including short-term and long-term debt, was $ 20.6 billion and $ 18.7 billion at June 30, 2024 and December 31, 2023, excluding $ 1.3 billion of unamortized discounts and issuance costs at both June 30, 2024 and December 31, 2023.

The estimated fair value of our outstanding debt was $ 20.4 billion and $ 18.5 billion at September 29, 2024 and December 31, 2023.

The outstanding principal amount of debt, including short-term and long-term debt, was $ 20.6 billion and $ 18.7 billion at September 29, 2024 and December 31, 2023, excluding approximately $ 1.3 billion of unamortized discounts and issuance costs at both September 29, 2024 and December 31, 2023.

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).

1 unchanged sentence

Repurchases of Common Stock

During the six months ended June 30, 2024, we repurchased 4.2 million shares of our common stock for $ 1.9 billion in open market purchases.

The total remaining authorization for future common stock repurchases under our share repurchase program was $ 8.2 billion as of June 30, 2024.

During the nine months ended September 29, 2024, we repurchased 5.7 million shares of our common stock in open market purchases for $ 2.7 billion.

The total remaining authorization for future common stock repurchases under our share repurchase program was $ 7.3 billion as of September 29, 2024.

In October 2024, subsequent to our third quarter, our Board of Directors authorized an increase of $ 3.0 billion to our share repurchase program, increasing our total authorization of the current program to $ 10.3 billion for future purchases.

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.

We paid cash dividends of $ 1.5 billion ($ 6.30 per share) during the six months ended June 30, 2024.

Additionally, we declared a third quarter 2024 dividend totaling approximately $ 751 million ($ 3.15 per share), which will be paid in September 2024 .

We paid cash dividends of $ 2.3 billion ($ 9.45 per share) during the nine months ended September 29, 2024.

In October 2024, subsequent to our third quarter, we authorized a fourth quarter 2024 dividend payment of $ 3.30 per share, an increase of $ 0.15 per share over our third quarter 2024 dividend of $ 3.15 per share.

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.

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Total other comprehensive income (loss) 57 53 110

Balance at June 30, 2024 $ ( 8,666 ) $ ( 103 ) $ ( 8,769 )

Balance at September 29, 2024 $ ( 8,647 ) $ ( 46 ) $ ( 8,693 )

Balance at December 31, 2022 $ ( 7,866 ) $ ( 157 ) $ ( 8,023 )

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Total other comprehensive income (loss) ( 111 ) ( 12 ) ( 123 )

Balance at June 25, 2023 $ ( 7,940 ) $ ( 139 ) $ ( 8,079 )

Balance at September 24, 2023 $ ( 7,977 ) $ ( 169 ) $ ( 8,146 )

(a) Reclassifications from AOCL related to postretirement benefit plans were recorded as a component of FAS income for each period presented.

These amounts include $ 19 million and $( 37 ) million, net of tax, for the quarters ended June 30, 2024 and June 25, 2023, which are comprised of the amortization of net actuarial losses of $ 47 million and $ 29 million for the quarters ended June 30, 2024 and June 25, 2023, and the amortization of net prior service credits of $ 28 million and $ 66 million for the quarters ended June 30, 2024 and June 25, 2023.

These amounts include $ 19 million and $( 37 ) million, net of tax, for the quarters ended September 29, 2024 and September 24, 2023, which are comprised of the amortization of net actuarial losses of $ 47 million and $ 30 million for the quarters ended September 29, 2024 and September 24, 2023, and the amortization of net prior service credits of $ 28 million and $ 67 million for the quarters ended September 29, 2024 and September 24, 2023.

See “Note 6 - Postretirement Benefit Plans”.

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and losses on sales of certain assets.

Our consolidated net profit booking rate adjustments increased sales by $ 383 million and $ 655 million during the quarter and six months ended June 30, 2024 and $ 359 million and $ 792 million during the quarter and six months ended June 25, 2023.

These adjustments increased segment operating profit by approximately $ 420 million ($ 332 million, or $ 1.39 per share, after tax) and $ 615 million ($ 486 million, or $ 2.02 per share, after tax) during the quarter and six months ended June 30, 2024, and $ 365 million ($ 288 million, or $ 1.14 per share, after tax) and $ 780 million ($ 616 million, or $ 2.42 per share, after tax) during the quarter and six months ended June 25, 2023.

During the three months ended March 31, 2024, we recognized a reach-forward loss of $ 100 million on a classified program at our MFC business segment described below.

During the three months ended June 25, 2023, we recognized a favorable profit adjustment of $ 65 million on an international surveillance and control program due to the positive resolution of a contractual matter, and a reach-forward loss of $ 100 million on the Canadian Maritime Helicopter Program (CMHP) as a result of increased costs and lower than planned revenues described below.

Our consolidated net profit booking rate adjustments increased sales by $ 358 million and $ 1.0 billion during the quarter and nine months ended September 29, 2024 and $ 231 million and $ 1.0 billion during the quarter and nine months ended September 24, 2023.

These adjustments increased segment operating profit by approximately $ 375 million ($ 296 million, or $ 1.24 per share, after tax) and $ 990 million ($ 782 million, or $ 3.26 per share, after tax) during the quarter and nine months ended September 29, 2024, and $ 335 million ($ 265 million, or $ 1.06 per share, after tax) and $ 1.1 billion ($ 881 million, or $ 3.48 per share, after tax) during the quarter and nine months ended September 24, 2023.

During the quarter ended September 29, 2024, we recognized losses of $ 80 million on a classified program at our Aeronautics business segment described below, resulting in total losses of $ 145 million on this classified program for the nine months ended September 29, 2024.

Additionally, consolidated net profit booking rate adjustments during the nine months ended September 29, 2024 include a reach-forward loss of $ 100 million recognized in the first quarter of 2024 on a classified program at our MFC business segment described below.

During the nine months ended September 24, 2023, we recognized a favorable profit adjustment of $ 65 million on an international surveillance and control program due to the positive resolution of a contractual matter, and a reach-forward loss of $ 100 million on the Canadian Maritime Helicopter Program (CMHP) as a result of increased costs and lower than planned revenues described below.

We have various development programs for new and upgraded products, services, and related technologies which have complex design and technical challenges.

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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 results, cash flows, or financial condition.

Any such losses are recorded in the period in which the loss is evident.

We have experienced performance issues on a classified fixed-price incentive fee contract at our Aeronautics business segment.

Phases within the contract involve highly complex design and systems integration and we have periodically recognized reach-forward losses.

During the second quarter of 2024, we recognized losses of $ 45 million related to higher than anticipated costs to maintain program objectives, increasing the cumulative losses to approximately $ 335 million.

We will continue to monitor the technical requirements and our performance, the remaining work and any future changes in scope or schedule, and estimated costs to complete the program and may have to record additional losses in future periods if we experience further performance issues, increases in scope, or cost growth, which could be

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

material to our financial results.

We have experienced performance issues on a classified fixed-price incentive fee contract at our Aeronautics business segment.

Phases within the contract involve highly complex design and systems integration and we have periodically recognized reach-forward losses.

During the third quarter of 2024, we recognized losses of $ 80 million due to higher than anticipated costs to achieve program objectives, bringing total losses for the nine months ended September 29, 2024, to $ 145 million.

With the additional $ 80 million of losses in the third quarter, cumulative losses increased to approximately $ 415 million.

We will continue to monitor the technical requirements and our performance, the remaining work and any future changes in scope or schedule, and estimated costs to complete the program, and we may have to record additional losses in future periods if we experience further performance issues, increases in scope, or cost growth, which could be material to our financial results.

Additionally, we will continue to assess the likelihood of losses for future phases.

We will be required to recognize additional losses for such phases if they are probable and such loss becomes evident.

Lastly, we and our industry team will continue to incur advanced procurement costs (also referred to as pre-contract costs) in order to enhance our ability to achieve the schedule and certain milestones.

Last, 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.

We will monitor the recoverability of pre-contract costs, which could be impacted by the customer’s decision regarding future phases of the program.

We have contracted with the Canadian Government for the Canadian Maritime Helicopter Program (CMHP) at our RMS business segment that 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.

We are currently in discussions with the Canadian Government to potentially restructure certain contractual terms and conditions that may be beneficial to both parties.

We have contracted with the Canadian government for the CMHP at our RMS business segment that 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.

The last of the 28 CH-148 aircraft is scheduled to be delivered in 2025.

The program has experienced performance issues, including delays in the final aircraft deliveries from the original contract requirement, and the Royal Canadian Air Force’s flight hours have been significantly less than originally anticipated, which has impacted program revenues and the recovery of our costs under this program.

We have incurred significant costs and recognized the related sales, of which about $ 970 million are currently included in contract assets on the balance sheet which could become at risk for future recovery.

Such assets are recovered based on flight hours.

Future sales and recovery of costs under the program are highly dependent upon achieving a certain number of flight hours, which are not entirely in our control and dependent on aircraft availability and performance, the availability of Canadian government resources, and potential restructured contract terms and conditions to better align with the current needs of the Canadian government and allow for cost recovery.

As of June 30, 2024, cumulative losses remained at approximately $ 100 million.

Future performance issues, lower than forecast flight hours, or changes in our estimates due to the outcome of restructuring discussions may further 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, which could be material to our operating results.

Such assets are recovered based on future flight hours, which are not entirely within our control and are dependent upon aircraft availability and performance and the availability of Canadian government resources.

During the third quarter of 2024, we entered into a modification to the In Service Support contract to better align contract scope with the Canadian government’s needs.

This modification mitigates, but does not eliminate the risk related to future sales and recovery of our costs.

We continue to engage in discussions with the Canadian government to potentially restructure certain contractual terms and conditions that may be beneficial to both parties.

However, any restructuring discussions may be prolonged or unsuccessful and are dependent upon Canadian government resources and priorities and other factors outside of our control.

Under the contract terms as modified, future sales and recovery of costs are dependent upon the Royal Canadian Air Force’s flight hours and program costs and performance.

As of September 29, 2024, cumulative losses remained at approximately $ 100 million.

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, which could be material to our operating results.

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 and we have provided force majeure notices under the affected contracts.

As of June 30, 2024, cumulative losses related to development work for the program remained insignificant and the program remains in a contract liability position on the balance sheet.

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 have partially stopped work on TUHP effective October 5, 2024.

We are currently in discussions 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.

As of September 29, 2024, cumulative losses related to development work for the program remained insignificant and the program remains in a contract liability position on the balance sheet.

The TUHP contracts may be negotiated to be restructured or terminated, either in whole or in part and as a result, we could be at risk of recording significant reach-forward losses in future periods.

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Accordingly, in the first quarter of 2024 we recognized a reach forward loss of approximately $ 100 million, bringing the cumulative losses recognized on the program to approximately $ 150 million, including charges for precontract costs recognized in prior periods.

During the second quarter of 2024, there were no significant changes to the previously recognized losses.

We will continue to assess the likelihood that additional options will be exercised, utilizing factors such as our performance, future requirements of the program, discussions with the customer and suppliers, customer funding, experience with other customer programs, among other factors.

During the second and

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

third quarters of 2024, there were no significant changes to the previously recognized losses.

We will continue to assess the likelihood that additional options will be exercised, utilizing factors such as our performance, future requirements of the program, discussions with the customer and suppliers, customer funding, and experience with other customer programs, among other factors.

We will be required to recognize additional losses for the remaining options if they become probable of being exercised.

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The ultimate amount of additional loss recognized, if any, will depend on how many of the additional options are exercised or become probable of being exercised and performance on those options.

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

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.

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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 30, 2024, our ending backlog was $ 158.3 billion.

As of September 29, 2024, our ending backlog was $ 165.7 billion.

We expect to recognize approximately 35 % of our backlog over the next 12 months and approximately 59 % over the next 24 months as revenue with the remainder recognized thereafter.

Our effective income tax rates were 15.8 % for the quarter and six months ended June 30, 2024 and 16.2 % and 15.8 % for the quarter and six months ended June 25, 2023.

Our effective income tax rates were 15.4 % and 15.6 % for the quarter and nine months ended September 29, 2024 and 13.8 % and 15.1 % for the quarter and nine months ended September 24, 2023.

The rate for the third quarter 2024 was higher than the rate for the third quarter 2023 primarily due to additional research and development tax credits that were claimed for years prior to 2023 reflected in the 2023 rate.

The rates for all periods benefited from research and development tax credits, tax deductions for foreign derived intangible income and dividends paid to our defined contribution plans with an employee stock ownership plan feature.

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Most of these investments are in equity 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 $ 604 million and $ 581 million at June 30, 2024 and December 31, 2023.

Due to changes in fair value and/or sales of investments, 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 and net losses of $ 40 million ($ 30 million, or $ 0.12 per share, after-tax) and $ 11 million ($ 8 million, or $ 0.03 per share, after-tax) during the quarter and six months ended June 25, 2023.

These gains or losses are reflected in the other non-operating income (expense), net account on our consolidated statements of earnings.

The carrying amounts of the investments were $ 603 million and $ 581 million at September 29, 2024 and December 31, 2023.

Due to changes in fair value and/or sales of investments, we recorded net losses of $ 19 million ($ 14 million, or $ 0.06 per share, after-tax) and $ 5 million ($ 4 million, or $ 0.02 per share, after-tax) during the quarter and nine months ended September 29, 2024 and net losses of $ 13 million ($ 10 million, or $ 0.04 per share, after-tax) and $ 24 million ($ 18 million, or $ 0.07 per share, after-tax) during the quarter and nine months ended September 24, 2023.

These gains or losses are reflected in the other non-operating income, net account on our consolidated statements of earnings.

Revolving Credit Facility

At September 29, 2024, we had a $ 3.0 billion Revolving Credit Facility with various banks, with the option to increase the commitments under the Revolving Credit Facility by an additional amount of up to $ 500 million (for an aggregate amount of up to $ 3.5 billion).

Effective August 23, 2024, we amended the agreement for the Revolving Credit Facility (the “Revolving Credit Agreement”) to extend the expiration date of the Revolving Credit Agreement from August 24, 2028 to August 24, 2029 and removed the existing financial maintenance covenant.

The Revolving Credit Agreement is available for any of our lawful corporate purposes, including supporting commercial paper borrowings.

Borrowings under the Revolving Credit Agreement are unsecured and bear interest at rates set forth in the Revolving Credit Agreement.

There were no borrowings under the Revolving Credit Agreement at September 29, 2024.

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Debt Issuance

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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.

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Sale of Commercial Engine Solutions

On September 9, 2024, we completed the sale of our Commercial Engine Solutions (CES) business, which was part of our Aeronautics business segment.

We received $ 170 million in cash from the sale.

Gains recognized from the sale in the quarter ended September 29, 2024 were not significant.

The final gain is subject to certain post-closing adjustments, including final working capital, indemnification, and tax adjustments, which we expect to complete in 2025.

This sale did not represent a strategic shift and the impacts to our consolidated results of operation, financial position, and cash were not significant.

Accordingly, the operating results and cash flows for the CES business up to the divestiture date have not been reclassified to discontinued operations.

NOTE 11 - RECENT ACCOUNTING PRONOUNCEMENTS

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We expect this ASU to impact only our disclosures with no impacts to our results of operations, cash flows and financial condition.

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

In December 2023, the FASB issued ASU No.

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Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of Lockheed Martin Corporation (the Company) as of June 30, 2024, the related consolidated statements of earnings, comprehensive income and equity for the quarters and six months ended June 30, 2024 and June 25, 2023, and consolidated statements of cash flows for the six months ended June 30, 2024 and June 25, 2023, and the related notes (collectively referred to as the “consolidated interim financial statements”) .

We have reviewed the accompanying consolidated balance sheet of Lockheed Martin Corporation (the Company) as of September 29, 2024, the related consolidated statements of earnings, comprehensive income and equity for the quarters and nine months ended September 29, 2024 and September 24, 2023, and consolidated statements of cash flows for the nine months ended September 29, 2024 and September 24, 2023, 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.

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Tysons, Virginia

July 23, 2024

October 22, 2024

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements