What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-01-28 compared with 2024-01-23 · 253 added, 264 removed, 1219 unchanged (30% of the section changed)

70 unchanged sentences

Services ( 10,217 ) ( 10,027 ) ( 9,252 )

Severance and other charges ( 92 ) ( 100 ) ( 36 )

Impairment and severance charges ( 87 ) ( 92 ) ( 100 )

Other unallocated, net 1,043 1,233 1,012

21 unchanged sentences

Postretirement benefit plans

Net actuarial (loss) gain recognized due to plan remeasurements, net of tax of $ 181 million in 2023, $ 518 million in 2022 and $ 925 million in 2021

Net actuarial gain (loss) recognized due to plan remeasurements, net of tax of $ 96 million in 2024, $ 181 million in 2023 and $ 518 million in 2022

340 ( 689 ) 1,873

1 unchanged sentence

76 ( 149 ) 69

Pension settlement charge, net of tax of $ 314 million in 2022 and $ 355 million in 2021

— 1,156 1,310

Pension settlement charge, net of tax of $ 314 million

Other, net, net of tax of $ 4 million in 2024, $ 6 million in 2023 and $ 2 million in 2022

51 unchanged sentences

Pension settlement charge — — 1,470

Severance and other charges 92 100 36

Impairment and severance charges 87 92 100

Classified programs losses 1,965 45 —

Receivables, net ( 219 ) 373 ( 542 )

29 unchanged sentences

Comprehensive

Stockholders’

Equity Noncontrolling

Subsidiary Total

Balance at December 31, 2021 $ 271 $ 94 $ 21,600 $ ( 11,006 ) $ 10,959

5 unchanged sentences

Stock-based awards, ESOP activity and other 1 501 — — 502

Net decrease in noncontrolling interests in subsidiary — — — — — ( 23 ) ( 23 )

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

17 unchanged sentences

Note 1 – Organization and Significant Accounting Policies

Organization – We are a global security and aerospace company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.

Organization – 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.

8 unchanged sentences

We classify all other assets and liabilities based on whether the asset will be realized or the liability will be paid within one year.

Effective January 1, 2023, we no longer consider amortization expense related to purchased intangible assets when evaluating the operating performance of our business segments.

As a result, intangible asset amortization expense, which was previously included in segment operating profit, is now reported in unallocated corporate expense within total consolidated operating profit.

This change has no impact on our consolidated operating results.

Management believes this updated presentation better aligns with how the business is viewed and managed and will provide better insights into business segment performance.

This change has been applied to the amounts in this Form 10-K, including amounts for 2022 and 2021.

See “Note 3 – Information on Business Segments” for further information regarding the impact of this change on our current and prior period segment operating profit.

Additionally, certain prior year amounts in the consolidated statements of cash flows have been reclassified within operating activities to conform to the current year’s presentation.

These reclassifications were not material and had no impact on total net cash provided by operating activities as previously reported.

On October 30, 2024, we closed our acquisition of Terran Orbital Corporation (Terran Orbital) for a purchase consideration of $ 314 million.

We accounted for this acquisition as a “step acquisition” (as defined in U.S.

GAAP) and accordingly, $ 83 million of our previously held investments in Terran Orbital were included as part of the purchase consideration.

The remaining purchase price of $ 231 million was paid with cash on hand (net of cash acquired).

Terran Orbital became a wholly-owned subsidiary and operates within our Space business segment.

The purchase consideration of $ 314 million 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 $ 298 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 respective acquisition date.

The financial results of Terran Orbital have been included within our operating results in the period post-acquisition.

Use of estimates – We prepare our consolidated financial statements in conformity with U.S.

23 unchanged sentences

cost-plus-award-fee, cost-plus-incentive-fee, and cost-plus-fixed-fee.

Cost-plus-award-fee contracts provide for an award fee that varies within specified limits based on the customer’s assessment of our performance against a predetermined set of criteria, such as targets based on cost, quality, technical and schedule criteria.

Cost-plus-incentive-fee contracts provide for

reimbursement of costs plus a fee, which is adjusted by a formula based on the relationship of total allowable costs to total target costs (i.e., incentive based on cost) or reimbursement of costs plus an incentive to exceed stated performance targets (i.e., incentive based on performance).

Cost-plus-award-fee contracts provide for an

award fee that varies within specified limits based on the customer’s assessment of our performance against a predetermined set of criteria, such as targets based on cost, quality, technical and schedule criteria.

Cost-plus-incentive-fee contracts provide for reimbursement of costs plus a fee, which is adjusted by a formula based on the relationship of total allowable costs to total target costs (i.e., incentive based on cost) or reimbursement of costs plus an incentive to exceed stated performance targets (i.e., incentive based on performance).

Cost-plus-fixed-fee contracts provide a fixed fee that is negotiated at the inception of the contract and does not vary with actual costs.

9 unchanged sentences

We determine the transaction price for each contract based on the consideration we expect to receive for the products or services being provided under the contract.

For contracts where a portion of the price may vary (e.g.

awards, incentive fees and claims), we estimate variable consideration at the most likely amount, which is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur.

For contracts where a portion of the price may vary (e.g., awards, incentive fees and claims), we estimate variable consideration at the most likely amount, which is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur.

We analyze the risk of a significant revenue reversal and if necessary constrain the amount of variable consideration recognized in order to mitigate this risk.

7 unchanged sentences

Our contracts with the U.S.

Government, including FMS contracts, are subject to the Federal Acquisition Regulations (FAR) and the price is typically based on estimated or actual costs plus a reasonable profit margin.

Government, including FMS contracts, are subject to the FAR and the price is typically based on estimated or actual costs plus a reasonable profit margin.

As a result of these regulations, the standalone selling price of products or services in our contracts with the U.S.

11 unchanged sentences

For most non-U.S.

government contracts, primarily international direct commercial contracts, continuous transfer of control to our customer is supported because we deliver products that do not have an alternative use to us and if our customer were to terminate the

contract for reasons other than our non-performance we would have the right to recover damages which would include, among other potential damages, the right to payment for our work performed to date plus a reasonable profit.

government contracts, primarily international direct commercial contracts, continuous transfer of control to our customer is

supported because we deliver products that do not have an alternative use to us and if our customer were to terminate the contract for reasons other than our non-performance we would have the right to recover damages which would include, among other potential damages, the right to payment for our work performed to date plus a reasonable profit.

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.

29 unchanged sentences

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.

Profit booking rates may increase during the performance of the contract if we successfully retire risks related to 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.

Profit booking rates may increase during the performance of the contract if we successfully retire risks related to 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.

2 unchanged sentences

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.

Increases in the profit booking rates, typically referred to as favorable profit adjustments, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract.

Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate and are typically referred to as unfavorable profit adjustments.

Increases or decreases in profit booking rates are recognized in the current period they are determined and reflect the inception-to-date effect of such changes.

Segment operating profit and margin may also be impacted favorably or unfavorably by other items, which may or may not impact sales.

Favorable items may include the positive resolution of contractual matters, cost recoveries on severance and restructuring, insurance recoveries and gains on sales of assets.

Unfavorable items may include 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.

Increases in the profit booking rates, typically referred to as favorable profit booking rate adjustments, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract.

Increases or decreases in profit booking rates are recognized in the period they are determined and reflect the inception-to-date effect of such changes.

Segment operating profit and margin can be impacted favorably or unfavorably by, for example, certain items listed below, which may or may not impact sales.

Favorable items include the positive resolution of contractual matters, cost recoveries on severance and restructuring, insurance recoveries and gains on sales of assets.

Unfavorable items include 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.

Our consolidated net profit booking rate adjustments increased net sales by $ 1.2 billion in 2024, $ 1.6 billion in 2023, and $ 2.0 billion in 2022.

These adjustments increased segment operating profit by approximately $ 1.6 billion ($ 1.3 billion, or $ 4.98 per share, after-tax) in 2023, $ 1.8 billion ($ 1.4 billion, or $ 5.40 per share, after-tax) in 2022 and $ 2.0 billion ($ 1.6 billion, or $ 5.81 per share, after-tax) in 2021.

These adjustments decreased segment operating profit by approximately $ 180 million ($ 142 million, or $ 0.59 per share, after-tax) in 2024 and increased segment operating profit by approximately $ 1.6 billion ($ 1.3 billion, or $ 4.98 per share, after-tax) in 2023 and $ 1.8 billion ($ 1.4 billion, or $ 5.40 per share, after-tax) in 2022.

Consolidated net profit booking rate adjustments during the year ended December 31, 2024 include losses of $ 555 million on a classified program at our Aeronautics business segment, reach-forward losses of $ 1.4 billion recognized on a classified program at our MFC business segment described below and $ 155 million of favorable profit rate adjustments following the resolution of a long-standing claim associated with a completed C-5 Galaxy aircraft contract at our Aeronautics business segment.

Consolidated net profit booking rate adjustments during the year ended December 31, 2023 include a favorable profit adjustment of $ 65 million on an international surveillance and control program due to the positive resolution of a contractual matter at our RMS business segment, 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 at our RMS business segment described below.

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).

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 are increasingly implementing procurement policies such as these that shift risk to contractors.

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.

1 unchanged sentence

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 that involves highly complex design and systems integration at our Aeronautics business segment and have periodically recognized reach-forward losses.

As of December 31, 2023, cumulative losses remained at approximately $ 270 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 material to our financial results.

In addition, 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.

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 are responsible for a program to design, develop and construct a ground-based radar at our RMS business segment.

The program has experienced performance issues for which we have periodically recognized reach-forward losses.

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 performance issues on an existing classified program at our Aeronautics business segment.

The initial phase is on a fixed-price incentive fee contract with options for additional phases.

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

During 2024, we recognized $ 555 million of losses on this program, including $ 410 million recognized in the fourth quarter of 2024.

During the fourth quarter of 2024, we again performed a comprehensive review of the program requirements, technical complexities, schedule, risks, and risk mitigation actions as a result of performance trends experienced in 2024 and in contemplation of near-

term program milestones.

Based on that review, we identified higher projected costs in engineering and integration activities that are necessary to achieve those forthcoming milestones.

As of December 31, 2024, cumulative losses recognized to date on this program were approximately $ 825 million.

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, and we may have to record additional losses that become evident in future periods if we experience further performance issues, increases in scope, or cost growth, which could be material to our financial results.

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 our assessment of the customer’s decision regarding the funding of future phases of the program.

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 $ 955 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 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 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 December 31, 2024, cumulative losses remained at approximately $ 100 million.

We will continue to monitor our performance, any future changes in scope, 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.

However, based on the losses previously recorded, the near completion status of the program, and our current estimate of the sales and costs to complete the

program, at this time we do not anticipate that additional losses, if any, would be material to our financial results or financial condition.

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.

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 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, a portion of which are currently included in contract assets on the balance sheet.

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 uncertain and dependent on aircraft availability and performance, and the availability of Canadian government resources.

During the second quarter of 2023, due to increases in estimated costs for the production and lower than planned revenues for the logistical support program considering discussions with the customer and subsequent analysis, we recognized a loss of $ 100 million ($ 75 million, or $ 0.29 per share, after-tax) on the program.

Future performance issues, lower than forecast flight hours, or changes in our estimates due to the outcome of any restructuring discussions, including revised contract scope or customer requirements may further affect our ability to recover our costs, including the contract assets recognized on the balance sheet, or our assessment of the likelihood of cost recovery and may result in additional losses that could be material to our operating results.

As of December 31, 2023, cumulative losses remained unchanged.

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.

1 unchanged sentence

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 December 31, 2023, we have recorded insignificant losses related to development work for the program.

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

We are currently in discussions with our 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.

As of December 31, 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.

Additionally, we 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, and increased unrecoverable costs, which could be material to our financial results.

Our MFC business segment was previously awarded a competitively bid classified contract, which includes multiple phases of the program.

We are currently performing on a phase which is primarily structured as cost-type.

Additional phases are primarily fixed price and are not currently able to be awarded.

If the additional phases are awarded at later dates, some of which could be within the next twelve months, we expect that those phases would be performed at a loss.

As of December 31, 2023, cumulative losses recognized were approximately $ 45 million.

We will continue to monitor the circumstances on the program and we may be required to recognize a reach-forward loss related to any additional phases at such time that we determine it is probable that they will be awarded.

Any such losses could be material to our financial results.

Research and development and similar costs – We conduct research and development (R&D) activities using our own funds (referred to as company-funded R&D or independent research and development (IR&D)) and under contractual arrangements with our customers (referred to as customer-funded R&D) to enhance existing products and services and to develop future technologies.

Additionally, our customer and subcontractor have asserted that we do not have the contractual right to stop work.

If we are unable to reach an agreement in the near term, 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, and increased unrecoverable costs, which could be material to our financial results.

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 now believe 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 losses of approximately $ 1.31 billion.

For the year ended December 31, 2024, MFC recognized losses of $ 1.41 billion for this program, bringing the cumulative losses recognized on the program to approximately $ 1.46 billion, including charges for pre-contract costs recognized in prior periods.

As of December 31, 2024, $ 1.36 billion of the losses were accrued in other current liabilities in our consolidated balance sheet.

Research and development and similar costs – We conduct research and development (R&D) activities using our own funds (referred to as company-funded or independent R&D (IR&D)) and under contractual arrangements with our customers

(referred to as customer-funded R&D) to enhance existing products and services and to develop future technologies.

R&D costs include basic research, applied research, concept formulation studies, design, development, and related test activities.

40 unchanged sentences

Property, plant and equipment – Property, plant and equipment are initially recorded at cost.

The cost of plant and equipment are depreciated generally using accelerated methods during the first half of the estimated useful lives of the assets

and the straight-line method thereafter.

The cost of plant and equipment are depreciated generally using accelerated methods during the first half of the estimated useful lives of the assets and the straight-line method thereafter.

The estimated useful lives of our plant and equipment generally range from 10 to 40 years for buildings and five to 15 years for machinery and equipment.

5 unchanged sentences

The amounts capitalized are included in other noncurrent assets on our consolidated balance sheets and are amortized on a straight-line basis over the estimated useful life of the resulting software, which ranges from two to 15 years.

As of December 31, 2023 and 2022, capitalized software totaled $ 1.4 billion and $ 919 million, net of accumulated amortization of $ 2.8 billion and $ 2.6 billion.

As of December 31, 2024 and 2023, capitalized software totaled $ 1.9 billion and $ 1.4 billion, net of accumulated amortization of $ 3.1 billion and $ 2.8 billion.

No amortization expense is recorded until the software is ready for its intended use.

15 unchanged sentences

Changes in fair value and/or sales of investments are reflected in the other non-operating income, net account on our consolidated statements of earnings.

During 2023 and 2022, we recorded net losses of $ 64 million ($ 48 million, or $ 0.19 per share, after-tax) and $ 114 million ($ 86 million, or $ 0.33 per share, after-tax).

During 2021, we recorded net gains of $ 265 million ($ 199 million, or $ 0.72 per share, after-tax).

We recorded net gains of $ 22 million ($ 17 million, or $ 0.07 per share, after-tax), net losses of $ 64 million ($ 48 million, or $ 0.19 per share, after-tax) and $ 114 million ($ 86 million, or $ 0.33 per share, after-tax) during 2024, 2023 and 2022.

Equity method investments – Investments where we have the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting and are included in other noncurrent assets on our consolidated balance sheets.

36 unchanged sentences

For all operating leases, we account for the lease and non-lease components as a single component.

Additionally, for certain equipment leases, we apply a portfolio approach to recognize operating lease ROU assets and liabilities.

Additionally, for certain equipment leases, we apply a portfolio approach to

recognize operating lease ROU assets and liabilities.

We evaluate ROU assets for impairment consistent with our property, plant and equipment policy.

29 unchanged sentences

Recent Accounting Pronouncements

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures

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 an entity to disclose the amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization included in each relevant expense caption.

It also requires an entity to include certain amounts that are already required to be disclosed under current GAAP in the same disclosure.

Additionally, it requires an entity to disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, and to disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.

The amendments in the ASU are effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted.

An entity may apply the amendments prospectively for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements.

While this ASU will impact only our disclosures and not our financial condition and results of operations, we are currently evaluating when we will adopt the ASU.

In March 2024, the SEC issued a final rule under SEC Release Nos.

33-11275 and 34-99678, The Enhancement and Standardization of Climate-Related Disclosures for Investors, that would require us to provide climate-related disclosures in our annual reports and registration statements beginning with our annual report for the year ending December 31, 2025.

The rule would require disclosure of material climate-related risks, our governance and risk management of climate-related risks and any material climate-related targets or goals, greenhouse gas emissions as well as disclosure of the financial statement effects, such as costs and losses resulting from severe weather events and other natural conditions.

In April 2024, the SEC released an order staying this final rule pending judicial review of all the petitions challenging the rule.

We are in the process of analyzing the impact of the rule and related litigation on our disclosures.

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No.

2023-07, Segment Reporting (Topic 280):

2 unchanged sentences

The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments.

The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements.

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

Income Taxes (Topic 740):

Improvements to Income Tax Disclosures

We adopted the new standard effective December 31, 2024.

As a result, we have enhanced our segment disclosures to include the presentation of cost of sales by segment and the disclosure of our CODMs.

The adoption of this ASU affects only our disclosures, with no impacts to our financial condition and results of operations.

In December 2023, the FASB issued ASU No.

4 unchanged sentences

For PBEs, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all period presented.

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

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 and results of operations.

Note 2 – Earnings Per Share

15 unchanged sentences

• Missiles and Fire Control – Provides air and missile defense systems;

tactical missiles and air-to-ground precision strike weapon systems;

tactical missiles and precision strike weapon systems;

fire control systems;

mission operations support, readiness, engineering support and integration services;

manned and unmanned ground vehicles;

ground vehicles;

and energy management solutions.

• Rotary and Mission Systems – Designs, manufactures, services and supports various military and commercial helicopters, surface ships, sea and land-based missile defense systems, radar systems, laser systems, sea and air-based mission and combat systems, command and control mission solutions, cyber solutions, and simulation and training solutions.

• Rotary and Mission Systems – Designs, manufactures, services and supports various military and commercial helicopters, sea- and land-based missile defense systems, radar systems, laser systems, sea- and air-based mission and combat systems, command and control mission solutions, cyber solutions, simulation and training solutions, and services and supports surface ships.

• Space – Engaged in the research and design, development, engineering and production of satellites, space transportation systems, and strategic, advanced strike, and defensive systems.

6 unchanged sentences

Net sales and operating profit of our business segments exclude intersegment sales, cost of sales and profit as these activities are eliminated in consolidation and thus are not included in management’s evaluation of performance of each segment.

Our Chief Executive Officer (CEO) and Chief Operating Officer (COO) serve as our Chief Operating Decision Makers (CODMs) and are responsible for reviewing segment performance and making decisions regarding resource allocation.

Our CODMs evaluate each segment’s performance based on metrics such as net sales, operating profit, and other key financial indicators, guiding strategic decisions to align with company-wide goals.

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.

Summary Operating Results

As discussed in “Note 1 – Organization and Significant Accounting Policies”, effective January 1, 2023, we no longer consider amortization expense related to purchased intangible assets when evaluating the operating performance of our business segments.

As a result, intangible asset amortization expense, which was previously included in segment operating profit, is now reported in unallocated items within total consolidated operating profit.

This change has been applied to the amounts below, including the amounts for 2022 and 2021.

Sales and operating profit for each of our business segments were as follows (in millions):

Sales, cost of sales and operating profit for each of our business segments were as follows (in millions):

2024 2023 2022

4 unchanged sentences

Total net sales $ 71,043 $ 67,571 $ 65,984

Cost of sales

Aeronautics $ 26,093 $ 24,649 $ 24,110

Missiles and Fire Control 12,277 9,712 9,676

Rotary and Mission Systems 15,391 14,399 14,258

Space 11,308 11,473 10,565

Total cost of sales $ 65,069 $ 60,233 $ 58,609

Operating profit

7 unchanged sentences

Intangible asset amortization expense ( 247 ) ( 247 ) ( 248 )

Severance and other charges (a)

Impairment and severance charges (a)

( 87 ) ( 92 ) ( 100 )

2 unchanged sentences

Total consolidated operating profit $ 7,013 $ 8,507 $ 8,348

(a) Severance and other charges include severance and other charges totaling $ 92 million ($ 73 million, or $ 0.30 per share, after-tax) associated with severance costs for the planned reduction of certain positions across the corporation and asset impairment charges in 2023;

$ 100 million ($ 79 million, or $ 0.31 per share, after-tax) charge related to actions at our RMS business segment, which include severance costs for reduction of positions and asset impairment charges in 2022;

and $ 36 million ($ 28 million, or $ 0.10 per share, after-tax) charge associated with plans to close and consolidate certain facilities and reduce total workforce within our RMS business segment in 2021.

(a) See “ Note 16 – Impairment and Severance Charges ” included in our Notes to Consolidated Financial Statements 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 management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, 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.

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 CAS or 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.

See “Note 1 – Organization and Significant Accounting Policies” (under the caption “Use of Estimates”) for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments.

See “Note 1 – Organization and Significant Accounting Policies” (under the

caption “Use of Estimates”) for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments.

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.

The operating portion of the total FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension income (expense) and total CAS pension cost.

The non-service FAS pension income (expense) components are included in non-service FAS pension income (expense) in our consolidated statements of earnings.

The non-service FAS pension income components are included in non-service FAS pension income in our consolidated statements of earnings.

As a result, to the extent that CAS pension cost exceeds the service cost component of FAS pension income (expense), we have a favorable FAS/CAS pension operating adjustment.

77 unchanged sentences

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

Net sales for the F-35 program represented approximately 26 % of our consolidated net sales during 2023 and 27 % during both 2022 and 2021.

Net sales for the F-35 program represented approximately 26 % of our consolidated net sales during both 2024 and 2023 and 27 % during 2022.

Capital Expenditures and PP&E Depreciation and Software Amortization

38 unchanged sentences

government customers totaling approximately $ 55.6 billion and $ 50.5 billion as of December 31, 2024 and 2023.

Contract assets increased $ 865 million during 2023, primarily due to the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations during 2023 for which we have not yet billed our customers (primarily on the F-35 program at Aeronautics).

Contract assets decreased $ 226 million during 2024, primarily due to billings related to the satisfaction or partial satisfaction of performance obligations during 2024 exceeding the revenue recognized (primarily on the F-35 program at Aeronautics).

There were no significant credit or impairment losses related to our contract assets during 2024 and 2023.

10 unchanged sentences

Total inventories $ 3,474 $ 3,132

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 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).

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 advanced 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 generally recognized as cost of sales consistent with the transfer of products and services to the customer upon the receipt of the anticipated contract.

Pre-contract costs that are initially capitalized in inventory are generally recognized as cost of sales 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 December 31, 2023 and 2022, $ 989 million and $ 791 million of pre-contract costs were included in inventories.

The increase in pre-contract costs as of December 31, 2023 is primarily driven by our Aeronautics business segment (primarily classified contracts).

As of December 31, 2024 and 2023, $ 1.5 billion and $ 989 million of pre-contract costs were included in inventories.

The increase in pre-contract costs as of December 31, 2024 is primarily driven by the classified contracts at our Aeronautics business segment and Sikorsky helicopter programs at our RMS business segment.

Note 6 – Property, Plant and Equipment, net

12 unchanged sentences

Balance at December 31, 2022 $ 196 $ 2,083 $ 6,726 $ 1,775 $ 10,780

Acquisitions — — 3 — 3

Other — 3 15 1 19

Balance at December 31, 2023 196 2,086 6,741 1,776 10,799

Acquisitions — — — 298 298

Other — ( 1 ) ( 29 ) — ( 30 )

17 unchanged sentences

Acquired finite-lived intangible assets are amortized to expense primarily on a straight-line basis over their estimated useful lives.

Amortization expense for acquired finite-lived intangible assets was $ 247 million, $ 248 million and $ 285 million in 2023, 2022 and 2021.

Amortization expense for acquired finite-lived intangible assets was $ 247 million for both 2024 and 2023 and $ 248 million in 2022.

Estimated future amortization expense is as follows:

10 unchanged sentences

The weighted average remaining lease term and discount rate for our operating leases were approximately 6.8 years and 3.5 % at December 31, 2024.

We recognized operating lease expense of $ 273 million in 2023 and $ 275 million in both 2022 and 2021.

In addition, we made cash payments of $ 267 million for operating leases during 2023, which are included in cash flows from operating activities in our consolidated statement of cash flows.

We recognized operating lease expense of $ 260 million, $ 273 million and $ 275 million in 2024, 2023 and 2022.

In addition, we made cash payments of $ 258 million, $ 267 million and $ 269 million for operating leases in 2024, 2023 and 2022, which are included in cash flows from operating activities in our consolidated statement of cash flows.

Future minimum lease commitments at December 31, 2024 were as follows (in millions):

11 unchanged sentences

Total federal income tax expense 748 1,071 842

Foreign income tax expense (benefit):

Foreign income tax expense:

Current 120 102 87

13 unchanged sentences

$ 1,306 21.0 % $ 1,701 21.0 % $ 1,403 21.0 %

Research and development tax credit ( 227 ) ( 2.8 ) ( 178 ) ( 2.7 ) ( 118 ) ( 1.6 )

Foreign derived intangible income deduction ( 210 ) ( 3.4 ) ( 185 ) ( 2.3 ) ( 176 ) ( 2.6 )

Research and development tax credit ( 207 ) ( 3.3 ) ( 227 ) ( 2.8 ) ( 178 ) ( 2.7 )

Tax deductible dividends ( 69 ) ( 1.1 ) ( 69 ) ( 0.9 ) ( 67 ) ( 1.0 )

Excess tax benefits for stock-based payment awards ( 20 ) ( 0.3 ) ( 25 ) ( 0.3 ) ( 42 ) ( 0.6 )

Other, net ( 17 ) ( 0.2 ) 8 0.1 31 0.6

Other, net (a)

84 1.3 ( 17 ) ( 0.2 ) 8 0.1

Income tax expense $ 884 14.2 % $ 1,178 14.5 % $ 948 14.2 %

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

(a) Other, net includes foreign income tax expenses for all years.

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.

Uncertain Tax Positions

8 unchanged sentences

Balance at December 31 $ 229 $ 146 $ 1,622

As of December 31, 2024, our liabilities associated with uncertain tax positions were $ 229 million compared to $ 146 million as of December 31, 2023.

The increase in uncertain tax positions did not have a material impact to our effective tax rate and if these uncertain tax positions were to be recognized in future periods, the impact will not be material.

As of December 31, 2022, our liabilities associated with uncertain tax positions were $ 1.6 billion.

For the year ended December 31, 2023, our liabilities associated with uncertain tax positions decreased to $ 146 million with a corresponding decrease to net deferred tax assets primarily resulting from our analysis of IRS Notice 2023-63 released on September 8, 2023 confirming that certain expenditures incurred in the performance of cost-type contracts are not subject to capitalization.

The reduction in uncertain tax positions had an immaterial impact to our effective tax rate.

It is reasonably possible that within the next twelve months, our liabilities associated with uncertain tax positions may increase by an immaterial amount.

This uncertain tax position will have an immaterial impact to our effective tax rate if recognized.

We recognize accrued interest and penalties related to unrecognized tax benefits as part of our income tax expense.

As of December 31, 2023 and 2022, our accrued interest and penalties related to unrecognized tax benefits were not material.

The decrease from 2022 to 2023 with a corresponding decrease to net deferred tax assets primarily resulted from our analysis of IRS Notice 2023-63 released on September 8, 2023 confirming that certain expenditures incurred in the performance of cost-type contracts are not subject to research and development capitalization.

The reduction in uncertain tax positions did not have a material impact to our effective tax rate.

Additionally, we recognize accrued interest and penalties related to unrecognized tax benefits as part of our income tax expense.

For the years ended December 31, 2024, 2023 and 2022, our accrued interest and penalties related to unrecognized tax benefits were not material.

Deferred Income Taxes

5 unchanged sentences

Research and development expenditures 1,643 1,251

Domestic company operating losses (a)

Foreign company operating losses and credits 6 19

6 unchanged sentences

Net deferred tax assets $ 3,533 $ 2,943

(a) Includes deferred tax assets and liabilities related to lease liability and ROU asset.

(a) Federal net operating losses obtained in the Terran Orbital transaction described above which do not expire.

(b) Includes deferred tax assets and liabilities related to lease liability and ROU asset.

We and our subsidiaries file federal income tax returns in the U.S.

19 unchanged sentences

3.60 % due 2035

4.50 % and 6.15 % due 2036

4.07 % due 2042

7 unchanged sentences

4.30 % due 2062

5.90 % due 2063

5.20 % due 2064

Other notes with rates from 4.85 % to 8.50 %, due 2025 to 2041

6 unchanged sentences

On August 24, 2022, we entered into a new Revolving Credit Agreement (the Revolving Credit Agreement) with various banks.

The Revolving Credit Agreement consists of a $ 3.0 billion five-year unsecured revolving credit facility, with the option to increase the commitments under the credit facility by an additional amount of up to $ 500 million (for an aggregate amount of up to $ 3.5 billion), subject to the agreement of one or more new or existing lenders to provide such additional amounts and certain other customary conditions.

Effectiv e August 24, 2023, we extended the expiration date of the Revolving Credit Agreement from August 24, 2027 to August 24, 2028.

The Revolving Credit Agreement consists of a $ 3.0 billion five-year unsecured revolving credit facility, with the option to increase the credit facility by an additional amount of up to $ 500 million (for an aggregate amount of up to $ 3.5 billion), subject to the existing lender approval per the terms and conditions of the agreement.

Effective August 23, 2024, we amended 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.

1 unchanged sentence

The Revolving Credit Agreement contains customary representations, warranties and covenants, including covenants restricting ours and certain of our subsidiaries’ ability to encumber assets and our ability to merge or consolidate with another entity.

The Revolving Credit Agreement replaces our revolving credit agreement (the “Former Credit Agreement”), which had been scheduled to mature on August 24, 2026.

The Former Credit Agreement, which had a total capacity of $ 3.0 billion and was undrawn, was terminated effective August 24, 2022.

There were no borrowings under the Revolving Credit Agreement or the Former Credit Agreement at December 31, 2023 and 2022.

As of December 31, 2023 and 2022, we were in compliance with all covenants contained in the Revolving Credit Agreement and Former Credit Agreement , as well as in our debt agreements.

There were no borrowings under the Revolving Credit Agreement at December 31, 2024 and 2023.

As of December 31, 2024 and 2023, we were in compliance with all covenants contained in the Revolving Credit Agreement as well as in our debt agreements.

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.

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.

There were no commercial paper borrowings outstanding as of December 31, 2024.

1 unchanged sentence

Long Term Debt

On May 25, 2023, we issued a total of $ 2.0 billion of senior unsecured notes, consisting of $ 500 million aggregate principal amount of 4.45 % Notes due May 15, 2028 (the “2028 Notes”), $ 850 million aggregate principal amount of 4.75 % Notes due February 15, 2034 (the “2034 Notes”) and $ 650 million aggregate principal amount of 5.20 % Notes due February 15, 2055 (the “2055 Notes” and, together with the 2028 Notes and 2034 Notes, the “Notes”) in a registered public offering.

Net proceeds of $ 1,975 million were received from the offering after deducting pricing discounts and debt issuance costs, which are being amortized and recorded as interest expense over the term of the Notes.

We will pay interest on the 2028 Notes semi-annually in arrears on May 15 and November 15 with the first payment to be made on November 15, 2023.

Additionally, we will pay interest on the 2034 Notes and 2055 Notes on February 15 and August 15 of each year with the first payment made on August 15, 2023.

On December 11, 2024, we issued a total of $ 1.0 billion of senior unsecured notes, consisting of $ 600 million aggregate principal amount of 4.70 % Notes due December 15, 2031 (the 2031 Notes) and $ 400 million aggregate principal amount of 5.20 % Notes due February 15, 2055 (the 2055 Notes together with 2031 Notes, the Notes).

The 2055 Notes were issued as additional notes under the indenture pursuant to the initial 2055 Notes and have the same terms as the initial 2055 Notes other than the date of issuance and the issue price.

With the issuance of the 2055 Notes, the aggregate principal amount of outstanding 5.20 % Notes due February 15, 2055 is $ 1,050 million.

Net proceeds of $ 990 million were received from the offering after deducting pricing discounts and debt issuance costs, excluding accrued interest on the 2055 Notes.

The pricing discounts and debt issuance costs are being amortized and recorded as interest expense over the term of the Notes.

We will pay interest on the 2031 Notes semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2025.

We will pay interest on the 2055 notes semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2025.

We may, at our option, redeem the Notes of any series in whole or in part at any time and from time to time at a redemption price equal to the greater of 100 % of the principal amount of the Notes to be redeemed or an applicable make-whole amount, plus accrued and unpaid interest to the date of redemption.

The Notes rank equally in right of payment with all of our existing unsecured and unsubordinated indebtedness.

On October 24, 2022, we issued a total of $ 4.0 billion of senior unsecured notes, consisting of $ 500 million aggregate principal amount of 4.95 % Notes due 2025 (the “2025 Notes”), $ 750 million aggregate principal amount of 5.10 % Notes due 2027 (the “2027 Notes”), $ 1.0 billion aggregate principal amount of 5.25 % Notes due 2033 (the “2033 Notes”), $ 1.0 billion aggregate principal amount of 5.70 % Notes due 2054 (the “2054 Notes”) and $ 750 million aggregate principal amount of 5.90 % Notes due 2063 (the “2063 Notes” and, together with the 2025 Notes, the 2027 Notes, the 2033 Notes and the 2054 Notes, the “October 2022 Notes”) in a registered public offering.

We will pay interest on the 2025 Notes semi-annually in arrears on April 15 and October 15 of each year with the first payment made on April 15, 2023.

We will pay interest on the 2033 Notes semi-annually in arrears on January 15 and July 15 of each year with the first payment made on January 15, 2023.

We will pay interest on each of 2027 Notes, 2054 Notes and 2063 Notes semi-annually in arrears on May 15 and November 15 of each year with the first payment made on May 15, 2023.

We may, at our option, redeem the October 2022 Notes of any series, in whole or in part, at any time at the redemption prices equal to the greater of 100 % of the principal amount of the October 2022 Notes to be redeemed or an applicable “make-whole” amount, plus accrued and unpaid interest to the date of redemption.

We used the net proceeds from this offering to enter into an accelerated share repurchase (ASR) agreement to repurchase $ 4.0 billion of our common stock.

On May 5, 2022, we issued a total of $ 2.3 billion of senior unsecured notes, consisting of $ 800 million aggregate principal amount of 3.90 % Notes due June 15, 2032 (the “2032 Notes”), $ 850 million aggregate principal amount of 4.15 % Notes due June 15, 2053 (the “2053 Notes”) and $ 650 million aggregate principal amount of 4.30 % Notes due June 15, 2062 (the “2062 Notes” and, together with the 2032 Notes and 2053 Notes, the “May 2022 Notes”) in a registered public offering.

Net proceeds received from the offering were after deducting pricing discounts and debt issuance costs, which are being amortized and recorded as interest expense over the term of the May 2022 Notes.

We will pay interest on the May 2022 Notes semi-annually in arrears on June 15 and December 15 of each year with the first payment made on June 15, 2022.

We may, at our option, redeem the May 2022 Notes of any series, in whole or in part, at any time and from time to time, at a redemption price equal to the greater of 100 % of the principal amount of the May 2022 Notes to be redeemed or an applicable make-whole amount, plus accrued and unpaid interest to the date of redemption.

On May 11, 2022, we used the net proceeds from the May 2022 Notes to redeem all of the outstanding $ 500 million in aggregate principal amount of our 3.10 % Notes due 2023, $ 750 million in aggregate principal amount of our 2.90 % Notes due 2025, and the remaining balance of the net proceeds to redeem $ 1.0 billion of our outstanding $ 2.0 billion in aggregate principal amount of our 3.55 % Notes due 2026 at their redemption price.

We paid make-whole premiums of $ 13.9 million in connection with the early extinguishments of debt.

We incurred losses of $ 34 million ($ 26 million, or $ 0.10 per share, after-tax) on these transactions related to early extinguishments of debt, additional interest expense and other related charges, which was recorded in other non-operating (expense) income, net in our consolidated statements of earnings.

On January 29, 2024, we issued a total of $ 2.0 billion of senior unsecured notes, consisting of $ 650 million aggregate principal amount of 4.50 % Notes due 2029 (the 2029 Notes), $ 600 million aggregate principal amount of 4.80 % Notes due 2034 (the 2034 Notes) and $ 750 million aggregate principal amount of 5.20 % Notes due 2064 (the 2064 Notes and, together with the 2029 Notes and 2034 Notes, the Recent Notes).

Net proceeds of $ 1.98 billion were received from the offering after deducting pricing discounts and debt issuance costs, which are being amortized and recorded as interest expense over the term of the Recent Notes.

We pay interest on the Notes semi-annually in arrears on February 15 and August 15 of each year with the first payment made on August 15, 2024.

We may, at our option, redeem the Recent Notes of any series in whole or in part at any time and from time to time at a redemption price equal to the greater of 100 % of the principal amount of the Recent Notes to be redeemed or an applicable make-whole amount, plus accrued and unpaid interest to the date of redemption.

The Recent Notes rank equally in right of payment with all of our existing unsecured and unsubordinated indebtedness.

On May 25, 2023, we issued a total of $ 2.0 billion of senior unsecured notes, consisting of $ 500 million aggregate principal amount of 4.45 % Notes due May 15, 2028 (the 2028 Notes), $ 850 million aggregate principal amount of 4.75 % Notes due February 15, 2034 (the 2034 Notes) and $ 650 million aggregate principal amount of 5.20 % Notes due February 15, 2055 (the initial 2055 Notes and, together with the 2028 Notes and 2034 Notes, the Earlier Notes) in a registered public offering.

We paid interest on the 2028 Notes semi-annually in arrears on May 15 and November 15 with the first payment made on November 15, 2023.

Additionally, we pay interest on the 2034 Notes and the initial 2055 Notes on February 15 and August 15 of each year with the first payment made on August 15, 2023.

We may, at our option, redeem the Earlier Notes of any series in whole or in part at any time and from time to time at a redemption price equal to the greater of 100 % of the principal amount of the Earlier Notes to be redeemed or an applicable make-whole amount, plus accrued and unpaid interest to the date of redemption.

The Earlier Notes rank equally in right of payment with all of our existing unsecured and unsubordinated indebtedness.

We made interest payments of approximately $ 950 million, $ 832 million and $ 573 million during the years ended December 31, 2024, 2023 and 2022.

1 unchanged sentence

Plan Descriptions

Many of our employees and retirees participate in various postretirement benefit plans including defined benefit pension plans, retiree medical and life insurance plans, defined contribution retirement savings plans, and other postemployment plans.

Many of our employees and retirees participate in various postretirement benefit plans including defined benefit pension, retiree medical and life insurance, defined contribution retirement savings, and other postemployment plans.

Substantially all of our postretirement benefit obligations relate to U.S.

8 unchanged sentences

Our defined benefit pension plans for salaried employees were fully frozen effective January 1, 2020, at which time such employees no longer earn additional benefits under the defined benefit pension plans and were transitioned to a defined contribution retirement savings plan.

We continue to take actions to mitigate the effect of our defined benefit pension plans on our financial results by reducing the volatility and size of our net pension obligations.

During the fourth quarter of 2023, a voluntary offering was made to certain former employees who had not yet commenced receiving their vested benefit payments.

Total settlement payments of $ 414 million for approximately 6,500 participants were made from the defined benefit pension trust with a similar corresponding reduction in benefit obligation.

During the second quarter of 2022, we purchased group annuity contracts to transfer $ 4.3 billion of gross defined benefit pension obligations and related plan assets to an insurance company for approximately 13,600 U.S.

retirees and beneficiaries.

In connection with this transaction, we recognized a noncash, non-operating pension settlement charge of $ 1.5 billion for the affected plans in the quarter ended June 26, 2022, which represents the accelerated recognition of actuarial losses that were included in the accumulated other comprehensive loss (AOCL) account within stockholders’ equity.

Similarly, during the third quarter of 2021, we purchased group annuity contracts to transfer $ 4.9 billion of gross defined benefit pension obligations and related plan assets to an insurance company for approximately 18,000 U.S.

retirees and beneficiaries, and in connection recognized a noncash pension settlement charge of $ 1.7 billion.

Qualified Defined Benefit Pension Plans and Retiree Medical and Life Insurance Plans

9 unchanged sentences

Expected return on plan assets 1,572 1,722 1,854 107 103 136

Recognized net actuarial (losses) gains ( 168 ) ( 425 ) ( 902 ) 31 46 —

Amortization of net actuarial (losses) gains ( 259 ) ( 168 ) ( 425 ) 35 31 46

Amortization of prior service credits (costs) 147 348 359 ( 4 ) ( 10 ) ( 27 )

Settlement charge — ( 1,470 ) ( 1,665 ) — — —

Settlement charge (a)

— — ( 1,470 ) — — —

Non-service FAS income (expense) 62 443 ( 971 ) 75 56 106

Total FAS income (expense) $ 2 $ 378 $ ( 1,058 ) $ 70 $ 51 $ 97

(a) During 2022, we recognized a settlement charge of $ 1.5 billion related to the accelerated recognition of actuarial losses for certain defined benefit pension plans that purchased group annuity contracts from an insurance company.

We record the service cost component of FAS income (expense) for our qualified defined benefit pension plans and retiree medical and life insurance plans in the cost of sales accounts;

37 unchanged sentences

(a) Benefit obligation balances represent the projected benefit obligation for our qualified defined benefit pension plans, which is approximately equal to accumulated benefit obligation, and accumulated benefit obligation for our retiree medical and life insurance plans.

(b) Actuarial losses for our qualified defined benefit pension plans in 2023 primarily reflect a decrease in the discount rate from 5.25 % at December 31, 2022 to 5.00 % at December 31, 2023, which increased benefit obligations by approximately $ 765 million.

(b) Actuarial gains for our qualified defined benefit pension plans in 2024 primarily reflect an increase in the discount rate from 5.00 % at December 31, 2023 to 5.625 % at December 31, 2024, which decreased benefit obligations by approximately $ 1.8 billion offset by net losses of approximately $ 250 million due to changes in demographic data and assumptions.

Actuarial gains for our retiree medical and life insurance plans in 2024 primarily reflect an increase in the discount rate from 5.00 % at December 31, 2023 to 5.50 % at December 31, 2024 and gains due to changes in demographic data and assumptions.

Actuarial losses for our qualified defined benefit pension plans in 2023 primarily reflect a decrease in the discount rate from 5.25 % at December 31, 2022 to 5.00 % at December 31, 2023, which increased benefit obligations by approximately $ 765 million.

Actuarial losses for our retiree medical and life insurance plans in 2023 reflect a decrease in the discount rate from 5.25 % at December 31, 2022 to 5.00 % at December 31, 2023.

Actuarial gains for our qualified defined benefit pension plans in 2022 primarily reflect an increase in the discount rate from 2.875 % at December 31, 2021 to 5.25 % at December 31, 2022, which decreased benefit obligations by $ 10.2 billion.

Actuarial gains for our retiree medical and life insurance plans in 2022 reflect an increase in the discount rate from 2.750 % at December 31, 2021 to 5.25 % at December 31, 2022, which decreased benefit obligations by $ 335 million.

(c) Qualified defined benefit pension plans settlements in 2023 include $ 414 million in the form of lump-sum settlement payments to former employees who had not commenced receiving their vested benefit payments.

The settlement payments had no impact on year 2023 FAS pension income.

Qualified defined benefit pension plan settlements in 2022 represent the transfer of gross defined benefit pension obligations and related plan assets to insurance companies pursuant to group annuity contracts purchased in the second quarter of 2022 as described above.

(d) Actual return on plan assets for our qualified defined benefit pension plans was approximately 7 % in 2023 and ( 18 )% in 2022.

(d) Actual return on plan assets for our qualified defined benefit pension plans was approximately 1 % in 2024 and 7 % in 2023 versus the 6.50 % long-term rate of return assumption.

We are required to recognize the net funded status of each postretirement benefit plan on a standalone basis as either an asset or a liability on our consolidated balance sheet.

1 unchanged sentence

Each year we measure the fair value of each plan’s assets and benefit obligation on December 31, consistent with our fiscal year end.

The fair value of each plan’s benefit obligation reflects assumptions in effect

as of the measurement date as described below.

The fair value of each plan’s benefit obligation reflects assumptions in effect as of the measurement date as described below.

For certain of our qualified defined benefit pension plans and retiree medical and life insurance plans the plan assets may exceed the benefit obligation, for which we recognize the net amount as an asset on our consolidated balance sheet.

48 unchanged sentences

2024 2023 2022 2024 2023 2022

Weighted average discount rate (a)

Weighted average discount rate

5.625 % 5.00 % 5.25 % 5.50 % 5.00 % 5.25 %

Expected long-term rate of return on assets (a)

Expected long-term rate of return on assets

6.50 % 6.50 % 6.50 % 6.50 % 6.50 % 6.50 %

2 unchanged sentences

Year ultimate health care trend rate is reached 2041 2038 2034

(a) A pension discount rate of 4.75 % was used for the applicable plans following the transaction and remeasurement recognized in the second quarter of 2022.

The long-term rate of return assumption represents the expected long-term rate of earnings on the funds invested, or to be invested, to provide for the benefits included in the benefit obligations.

32 unchanged sentences

Commingled equity funds 382 170 212 — 423 163 260 —

Fixed income (a) :

Fixed income (b) :

Corporate debt securities 4,159 — 4,099 60 4,510 — 4,495 15

3 unchanged sentences

Interest rate swaps, net ( 1,878 ) ( 1,878 ) ( 1,284 ) ( 1,284 )

Other fixed income investments (b)

Other fixed income investments (c)

2,050 60 882 1,108 1,949 63 725 1,161

1 unchanged sentence

Investments measured at NAV

Commingled equity funds — —

Other fixed income investments 552 826

3 unchanged sentences

Total investments measured at NAV

Loan, net (c)

Loan, net (d)

( 473 ) ( 497 )

1 unchanged sentence

Total $ 24,092 $ 24,515

(a) Cash and cash equivalents, equity securities and fixed income securities include derivative assets and liabilities with fair values that were not material as of December 31, 2023 and 2022.

(a) Cash and cash equivalents and equity securities include derivative assets and liabilities with fair values that were not material as of December 31, 2024 and 2023.

LMIMCo’s investment policies restrict the use of derivatives to either establish long or short exposures for purposes consistent with applicable investment mandate guidelines or to hedge risks to the extent of a plan’s current exposure to such risks.

Most derivative transactions are settled on a daily basis.

(b) Level 3 investments include $ 1.1 billion at both December 31, 2023 and at December 31, 2022 related to buy-in contracts.

(c) The Lockheed Martin Corporation Master Retirement Trust (MRT) obtained a loan from a third-party financial institution, collateralized by private equity investments, to invest in fixed income securities.

(b) Fixed income securities include (i) derivative exposure for the liability hedge, which constitutes most of the value in interest rate swaps, and (ii) other derivative exposure with fair values that were not material as of December 31, 2024 and 2023.

(c) Level 3 investments include 1.0 billion at December 31, 2024 and $ 1.1 billion at December 31, 2023 related to buy-in contracts.

(d) The Lockheed Martin Corporation Master Retirement Trust (MRT) obtained a loan from a third-party financial institution, collateralized by private equity investments, to invest in fixed income securities.

Changes in the fair value of plan assets categorized as Level 3 during 2024 and 2023 were not significant.

Cash equivalents are mostly comprised of short-term money-market instruments and are valued at cost, which approximates fair value.

Cash equivalents are mostly comprised of short-term money-market instruments or short-term investment funds and are valued at cost, which approximates fair value.

equity securities and international equity securities categorized as Level 1 are traded on active national and international exchanges and are valued at their closing prices on the last trading day of the year.

10 unchanged sentences

Significant inputs include projected annuity payments and the discount rate applied to those payments.

Certain commingled equity and fixed income funds, consisting of underlying equity and fixed income securities, respectively, are valued using the NAV practical expedient.

Certain fixed income funds are recorded using the NAV practical expedient.

The NAV valuations are based on the underlying investments and typically redeemable within 90 days.

The NAV is the total value of the fund divided by the number of the fund’s shares outstanding.

Private equity funds consist of partnerships and similar vehicles.

The NAV is based on valuation models of the underlying securities, which includes unobservable inputs that cannot be corroborated using verifiable observable market data.

Private equity funds consist of partnerships and similar vehicles and are recorded using the NAV practical expedient.

The NAV valuations are based on valuation models of the underlying securities, which includes unobservable inputs that cannot be corroborated using verifiable observable market data.

These funds typically have terms between eight and 12 years.

Real estate funds consist of partnerships and similar vehicles, for which the NAV is based on valuation models and periodic appraisals.

Real estate funds consist of partnerships and similar vehicles and are recorded using the NAV practical expedient.

The NAV valuations are based on valuation models and periodic appraisals.

These funds typically have terms between eight and 10 years.

Hedge funds generally consist of separate accounts and commingled funds, for which the NAV is generally based on the valuation of the underlying investments.

Hedge funds generally consist of separate accounts and commingled funds and are recorded using the NAV practical expedient.

The NAV valuations are based on the valuation of the underlying investments.

Redemptions in hedge funds generally range from a minimum of one month to several months.

1 unchanged sentence

The required funding of our qualified defined benefit pension plans is determined in accordance with ERISA, as amended, and in a manner consistent with CAS and Internal Revenue Code rules.

We made no contributions to our qualified defined benefit pension plans in 2023 and do not plan to make contributions to our qualified defined benefit pension plans in 2024.

We made $ 990 million of cash contributions to our qualified defined benefit pension plans in 2024.

There are no expected required contributions to our qualified defined benefit pension plans in 2025.

The following table presents estimated future benefit payments as of December 31, 2024 (in millions):

6 unchanged sentences

We sponsor nonqualified defined benefit pension plans to provide benefits in excess of qualified plan limits imposed by federal tax law.

The gross benefit obligation for these plans was $ 1.0 billion as of both December 31, 2023 and 2022, most of which was recorded in the other noncurrent liabilities account on our consolidated balance sheet.

The gross benefit obligation for these plans was $ 905 million and $ 1.0 billion as of December 31, 2024 and 2023, most of which was recorded in the other noncurrent liabilities account on our consolidated balance sheet.

We have set aside certain assets totaling $ 658 million and $ 615 million as of December 31, 2024 and 2023 in a separate trust that we expect to use to pay the benefit obligations under our nonqualified defined benefit pension plans, most of which were recorded in the other noncurrent assets account on our consolidated balance sheet.

1 unchanged sentence

Actuarial losses and unrecognized prior service credits related to our nonqualified defined benefit pension plans that were recorded in accumulated other comprehensive loss, pretax, totaled $ 303 million and $ 347 million at December 31, 2024 and 2023.

We recognized pretax pension expense of $ 64 million in 2023, $ 81 million in 2022 and $ 56 million in 2021 related to our nonqualified defined benefit pension plans.

The assumptions used to determine the benefit obligations and FAS expense for our

nonqualified defined benefit pension plans are similar to the assumptions for our qualified defined benefit pension plans described above.

We recognized pretax pension expense of $ 62 million in 2024, $ 64 million in 2023 and $ 81 million in 2022 related to

our nonqualified defined benefit pension plans.

The assumptions used to determine the benefit obligations and FAS expense for our nonqualified defined benefit pension plans are similar to the assumptions for our qualified defined benefit pension plans described above.

We also sponsor other postemployment and foreign benefit plans, which are accounted for similar to defined benefit pension plans.

The benefit obligations, assets, expense, and amounts recorded in accumulated other comprehensive loss for other postemployment and foreign benefit plans were not material to our results of operations, financial position or cash flows.

Defined Contribution Retirement Savings Plans

4 unchanged sentences

Plan participants can transfer from the ESOP fund into any investment option provided by the respective plan.

Our contributions to defined contribution retirement savings plans were $ 1.2 billion in 2023 and $ 1.1 billion in both 2022 and 2021.

Our contributions to defined contribution retirement savings plans were $ 1.2 billion in both 2024 and 2023.

Our defined contribution retirement savings plans held 24.9 million and 26.6 million shares of our common stock at December 31, 2024 and 2023.

5 unchanged sentences

Repurchases of Common Stock

During 2024, we repurchased 7.5 million shares of our common stock in open market purchases for $ 3.7 billion.

During 2023, we repurchased 13.4 million shares of our common stock for $ 6.0 billion pursuant to accelerated share repurchase (ASR) agreements and open market purchases.

We also retired an additional 1.5 million shares received for no additional consideration in the first quarter of 2023 upon final settlement of an ASR agreement executed in the fourth quarter of 2022.

During 2022, we repurchased 18.3 million shares of our common stock for $ 7.9 billion, including 13.9 million shares of our common stock repurchased pursuant to ASR agreements and the remainder in open market purchases.

The total remaining authorization for future common share repurchases under our share repurchase program was $ 10.0 billion as of December 31, 2023, including a $ 6.0 billion increase to the program authorized by our Board of Directors in October 2023.

The total remaining authorization for future common stock repurchases under our share repurchase program was $ 9.3 billion as of December 31, 2024, which includes the $ 3.0 billion increase to our share repurchase program authorized by our Board of Directors in October 2024.

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.

16 unchanged sentences

Amortization of net prior service credits ( 268 ) — ( 268 )

Other — 44 44

Total reclassified from AOCL 1,225 44 1,269

1 unchanged sentence

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

Other comprehensive income (loss) before reclassifications 1,873 ( 159 ) 1,714

Other comprehensive (loss) income before reclassifications ( 689 ) 23 ( 666 )

Amounts reclassified from AOCL

Pension settlement charge (b)

1,156 — 1,156

Recognition of net actuarial losses 116 — 116

2 unchanged sentences

Total reclassified from AOCL ( 149 ) 35 ( 114 )

Total other comprehensive income (loss) 3,098 ( 115 ) 2,983

Total other comprehensive (loss) income ( 838 ) 58 ( 780 )

Balance at December 31, 2023 ( 8,704 ) ( 99 ) ( 8,803 )

Other comprehensive (loss) income before reclassifications

Other comprehensive income (loss) before reclassifications

340 ( 104 ) 236

5 unchanged sentences

Total reclassified from AOCL 76 39 115

Total other comprehensive (loss) income ( 838 ) 58 ( 780 )

Total other comprehensive income (loss) 416 ( 65 ) 351

Balance at December 31, 2024 $ ( 8,288 ) $ ( 164 ) $ ( 8,452 )

2 unchanged sentences

See “Note 9 – Income Taxes” and “Note 11 – Postretirement Benefit Plans” for more information on our income taxes and postretirement benefit plans.

(b) During 2022 and 2021, we recognized a noncash, non-operating pension settlement charge of $ 1.5 billion ($ 1.2 billion, or $ 4.33 per share, after-tax) and $ 1.7 billion ($ 1.3 billion, $ 4.72 per share, after-tax) related to the accelerated recognition of actuarial losses included in AOCL for certain defined benefit pension plans that purchased a group annuity contract from an insurance company (see “Note 11 – Postretirement Benefit Plans”).

(b) During 2022, we recognized a noncash, non-operating pension settlement charge of $ 1.5 billion ($ 1.2 billion, or $ 4.33 per share, after-tax) related to the accelerated recognition of actuarial losses included in AOCL for certain defined benefit pension plans that purchased a group annuity contract from an insurance company (see “Note 11 – Postretirement Benefit Plans”).

Note 13 – Stock-Based Compensation

11 unchanged sentences

As of December 31, 2024, we had $ 235 million of unrecognized compensation cost related to nonvested awards, which is expected to be recognized over a weighted average period of 1.6 years.

We received zero cash from the exercise of stock options during 2023, $ 8 million and $ 28 million during 2022 and 2021.

We received zero cash from the exercise of stock options during both 2024 and 2023 and $ 8 million during and 2022.

In addition, our income tax liabilities for 2024, 2023 and 2022 were reduced by $ 67 million, $ 78 million and $ 124 million due to recognized tax benefits on stock-based compensation arrangements.

21 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), 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 alleges 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 contends 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 alleges 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 assert 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 is scheduled for May 6, 2024.

We believe that we have legal and factual defenses to the U.S.

Government’s remaining claims.

Government seeks damages of approximately $ 52 million, subject to trebling, plus statutory penalties.

Although we continue to evaluate our liability and exposure, we do not currently believe that it is probable that we will incur a material loss.

If, contrary to our expectations, the U.S.

Government prevails on the remaining issues in this matter and proves damages at or near $ 52 million and is successful in having such damages trebled, the outcome could have an adverse effect on our results of operations in the period in which a liability is recognized and on our cash flows for the period in which any damages are paid.

Lockheed Martin v.

4 unchanged sentences

The primary damages sought by the MTA are the costs to complete the contract and potential re-procurement costs.

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.

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.

3 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

11 unchanged sentences

At December 31, 2024 and 2023, the aggregate amount of liabilities recorded relative to environmental matters was $ 677 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 $ 613 million and $ 618 million at December 31, 2023 and 2022, most of which are recorded in other noncurrent assets on our consolidated balance sheets.

We have recorded assets for the portion of environmental costs that are probable of future recovery totaling $ 619 million and

$ 613 million at December 31, 2024 and 2023, most of which are recorded in other noncurrent assets on our consolidated balance sheets.

See “Note 1 – Organization and Significant Accounting Policies” for more information.

11 unchanged sentences

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 of perchlorate and hexavalent chromium at the federal and state level could adversely affect us.

In particular, the U.S.

Environmental Protection Agency (EPA) is considering whether to regulate hexavalent chromium at the federal level, and as a result of a court decision, must regulate perchlorate at the federal level.

The California State Water Resources Control Board (SWRCB) continues to reevaluate its existing drinking water standard of 6 parts per billion (ppb) for perchlorate.

The California SWRCB has also proposed to regulate hexavalent chromium at 10 ppb, which we currently do not expect would materially increase our cleanup costs in California.

If substantially lower standards are adopted for perchlorate or for hexavalent chromium, we expect a material increase in our estimates for environmental liabilities and the related assets for the portion of the increased costs that

are probable of future recovery in the pricing of our products and services for the U.S.

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 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.

1 unchanged sentence

Government contracts would be expensed, which may have a material effect on our earnings in any particular interim reporting period.

We also are evaluating the potential impact of existing and contemplated legal requirements addressing a class of chemicals known generally as per- and polyfluoroalkyl substances (PFAS).

PFAS have been used ubiquitously, such as in fire-fighting foams, manufacturing processes, and stain- and stick-resistant products (e.g., Teflon, stain-resistant fabrics).

Because we have used products and processes over the years containing some of those compounds, they likely exist as contaminants at many of our environmental remediation sites.

Governmental authorities have announced plans, and in some instances have begun, to regulate certain of these compounds at extremely low concentrations in drinking water, which could lead to increased cleanup costs at many of our environmental remediation sites.

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

1 unchanged sentence

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 $ 2.9 billion at both December 31, 2023 and December 31, 2022.

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

Third-party guarantees do not include guarantees issued on behalf of subsidiaries and other consolidated entities.

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

At December 31, 2023 and 2022, third-party guarantees totaled $ 1.0 billion and $ 904 million, of which approximately 75 % and 71 % related to guarantees of contractual performance of joint ventures to which we currently are or previously were a party.

At December 31, 2024 and 2023, third-party guarantees totaled $ 351 million and $ 1.0 billion, of which approximately 30 % 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.

4 unchanged sentences

Other Contingencies

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.

During the third quarter of 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 and, on the anticipated basis of the Government’s appeal, we recognized approximately $ 85 million of sales and operating profit.

Subsequently, on December 18, 2024, the Government voluntarily dismissed its appeal of the ASBCA’s decision in the U.S.

Court of Appeals for the Federal Circuit.

Following the dismissal, in the fourth quarter of 2024, we recognized the remaining approximately $ 70 million of sales and operating profit and received payment of the full award of approximately $ 155 million, which includes accrued interest, resolving this matter in our favor.

Independent of this matter and 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.

Government investigations of us, whether relating to government contracts or conducted for other reasons, could result in administrative, civil, or criminal liabilities, including repayments, fines or penalties being imposed upon us, suspension, proposed debarment, debarment from eligibility for future 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 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.

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

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 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 U.S., which are subject to U.S.

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.

1 unchanged sentence

Government regulations also may be audited or investigated.

In the normal course of business, we provide warranties to our customers associated with certain product sales.

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.

11 unchanged sentences

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 plan and are recorded in other noncurrent assets on our consolidated balance sheets.

As of December 31, 2023 and 2022, the fair value of our assets held in the trust totaled $ 1.8 billion and $ 1.6 billion.

Net gains on these securities were $ 240 million and $ 205 million in 2023 and 2021 and net losses of $ 323 million in 2022.

As of both December 31, 2024 and 2023, the fair value of our assets held in the trust totaled $ 1.8 billion.

Net gains on these securities were $ 170 million and $ 240 million in 2024 and 2023.

Gains and losses on these investments are included in other unallocated, net within cost of sales on our consolidated statements of earnings in order to align the classification of changes in the market value of investments held for the plan with changes in the value of the corresponding plan liabilities.

1 unchanged sentence

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.

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 use derivative instruments principally to reduce our exposure to market risks from changes in foreign currency exchange rates and interest rates.

We do not enter into or hold derivative instruments for speculative trading purposes.

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 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 do not enter into or hold derivative instruments for speculative trading purposes.

These 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.

19 unchanged sentences

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 16 – Severance and Other Charges

During the fourth quarter of 2023, we recorded severance and other charges of $ 92 million ($ 73 million, or $ 0.30 per share, after-tax) associated with s everance costs for the planned reduction of certain positions across the corporation and asset impairment charges .

Upon separation, terminated employees will receive lump-sum severance payments primarily based on years of service, the majority of which are expected to be paid over the next several quarters.

Note 16 – Impairment and Severance Charges

During 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.

During 2023, we recorded severance and other charges of $ 92 million ($ 73 million, or $ 0.30 per share, after-tax) associated with s everance costs for the planned reduction of certain positions across the corporation and asset impairment charges .

Upon separation, terminated employees received lump-sum severance payments primarily based on years of service, the majority of which have been paid.

This action resulted from a review of our business segments and corporate functions and is intended to improve the efficiency of our operations.

During the fourth quarter of 2022, we recorded severance and other charges totaling $ 100 million ($ 79 million, or $ 0.31 per share, after-tax) related to actions at our RMS business segment, which include severance costs for reduction of positions and asset impairment charges.

During 2022, we recorded severance and other charges totaling $ 100 million ($ 79 million, or $ 0.31 per share, after-tax) related to actions at our RMS business segment, which include severance costs for reduction of positions and asset impairment charges.

After a strategic review of RMS, these actions improved the efficiency of our operations and better aligned the organization and cost structure with changing economic conditions and changes in program lifecycles.

During 2021, we recognized severance charges totaling $ 36 million ($ 28 million, or $ 0.10 per share, after-tax) related to workforce reductions and facility exit costs within our RMS business segment.

These actions were taken to consolidate certain operations in order to improve the efficiency of RMS’ manufacturing operations and the affordability of its products and services.

Employees terminated as part of these actions will receive lump-sum severance payments upon separation primarily based on years of service.

We generally can recover a portion of severance costs through the pricing of our products and services to the U.S.

2 unchanged sentences

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-K

Item 8. Financial Statements and Supplementary Data