1 unchanged sentence
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand our results of operations and financial condition.
−Removed: The MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and notes to consolidated financial statements and with our Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Form 10-K).
+Added: The MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and notes to consolidated financial statements herein and with our Annual Report on Form 10-K for the year ended December 31, 2024 (2024 Form 10-K).
BUSINESS OVERVIEW
−Removed: We are a global defense technology company driving innovation and advancing scientific discovery.
−Removed: Our all-domain mission solutions and 21 st Century Security vision accelerate the delivery of transformative technologies to our customers.
−Removed: We are principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.
+Added: 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.
2 unchanged sentences
and international customers with products and services that have defense, civil and commercial applications, with our principal customers being agencies of the U.S.
−Removed: During the nine months ended September 29, 2024, 74% of our $52.4 billion in net sales were from the U.S.
+Added: During the quarter ended March 30, 2025, 72% of our $18.0 billion in sales were from the U.S.
Government, either as a prime contractor or as a subcontractor (including 63% from the Department of Defense (DoD)), 27% were from international customers (including foreign military sales (FMS) contracted through the U.S.
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commercial and other customers.
−Removed: Budget Environment
−Removed: With approximately three quarters of our sales from the U.S.
−Removed: Government, U.S.
−Removed: Government spending levels, particularly defense spending, and timely funding thereof can affect our financial performance over the short and long term.
−Removed: On March 22, 2024, the President signed the second Fiscal Year (FY) 2024 Consolidated Appropriations package into law, which includes the DoD funding.
−Removed: This legislation reflects the Fiscal Responsibility Act of 2023 (FRA) spending limit of $886 billion for National Defense, of which $842 billion was for the DoD base budget.
−Removed: The President’s FY 2025 budget request was submitted to Congress on March 11, 2024, initiating the FY 2025 defense authorization and appropriations legislative process.
−Removed: The request included $895 billion for National Defense, of which $850 billion is for the DoD base budget, in keeping with the limit established by the FRA.
−Removed: While compression on overall requirements driven by the FRA limit is evident, the Office of the Secretary of Defense has stated the FY 2025 budget proposal meets their objectives of keeping National Defense Strategy priorities on track.
−Removed: On April 24, 2024, the President signed a bill providing a total of $95 billion in additional supplemental funding for Ukraine, Israel and Taiwan, including funding for the restock of U.S.
−Removed: munitions capacity.
−Removed: Supplemental funding legislation is not subject to the FRA limits.
−Removed: The House and Senate continue the legislative process on the FY 2025 budget.
−Removed: The House Armed Services and Appropriations Committees marked the FY25 Defense budget consistent with the FY25 President’s Budget Request (PBR) and Congressionally mandated budget caps established by the FRA with a topline of $849.8 billion.
−Removed: The Senate Armed Services and Appropriations Committees did not adhere to the FRA spending caps and marked budgets above the PBR, with the committees providing between a $21 billion and $25 billion increase over the PBR level.
−Removed: Regardless of toplines, all four bills support additional funding for several of our programs, spread across our four business areas.
−Removed: In the coming months, Congress will need to approve or revise the President’s FY 2025 budget proposal through enactment of appropriations bills and other policy legislation, which would then require final approval from the President in order for the FY 2025 budget process to conclude.
−Removed: A Continuing Resolution (CR) passed the House and Senate on September 25, 2024 and was signed by the President on September 26, 2024.
−Removed: The bill funds U.S.
−Removed: Government operations through December 20, 2024.
−Removed: After the November 2024 election, Congress will return to the task of funding the U.S.
−Removed: Government for the balance of the FY 2025.
−Removed: Significant differences that must be resolved include the different allocations as noted above and policy matters that arose during consideration of the CR and the underlying bills.
−Removed: We anticipate the federal budget will continue to be subject to debate and compromise shaped by, among other things, heightened political tensions and the 2024 elections, the global security environment, inflationary pressures, and macroeconomic conditions.
−Removed: The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs.
−Removed: See also the discussion of U.S.
−Removed: Government funding risks within “Item 1A, Risk Factors” included in our 2023 Form 10-K.
−Removed: Geopolitical and Economic Environment
−Removed: We operate in a complex and evolving global security environment and our business is affected by geopolitical and security issues.
−Removed: Russia’s invasion of Ukraine, conflicts in the Middle East and heightened tension in the Pacific region have elevated global security concerns resulting in increased interest for our products and services as countries seek to improve their security posture.
−Removed: In this context, the U.S.
−Removed: Government, our largest customer, continues to align its budget with the defense priorities set forth in the 2022 National Defense Strategy.
−Removed: In addition, security assistance provided by the U.S.
−Removed: Government and its allies to Ukraine has increased U.S.
−Removed: Government and allied demand to replenish U.S.
−Removed: stockpiles, resulting in additional and potential future orders, including for the ramp-up in production capacity for certain products.
−Removed: We continue to expect additional orders over the next several years attributable to the global threat environment.
−Removed: We operate primarily in a long-cycle business and the U.S.
−Removed: Government has been focused on increasing industry capacity to meet demand.
+Added: Global Security
+Added: We operate in a complex and evolving global security environment.
+Added: Conflicts or tensions in areas such as Europe, the Middle East, and the Pacific region have heightened tensions and highlighted security requirements globally, including these regions as well as the U.S.
+Added: Although these tensions and conflicts may drive interest in specific products or services as countries seek to improve their security posture, our business primarily operates on a long-cycle basis.
+Added: As a result, the U.S.
+Added: Government has been broadly focused on increasing industry capacity to meet long-term demand.
We continue to work with the U.S.
−Removed: Government and our supply chain to evaluate increases in capacity at our operations to anticipate potential demand and enable us to deliver critical capabilities.
−Removed: Our business and financial performance is also affected by general economic conditions.
+Added: Government, international partners, and our supply chain to increase capacity and enhance our ability to scale our operations to anticipate potential demand, deliver critical capabilities, and replenish depleted U.S.
+Added: and allied stockpiles of products that have been used over the past several years.
+Added: Global Economic and Geopolitical Environment
+Added: Our business and financial performance is impacted by general economic conditions including inflationary pressures, delays and disruptions in supply chains, business slowdowns or shutdowns, workforce challenges and labor shortfalls, and market volatility.
+Added: These macroeconomic factors have contributed, and may continue to contribute, to increased costs, delays, disruptions and other performance challenges, as well as increased competing demands for limited resources to address such increased costs and other challenges, for our company, our suppliers and partners, and our customers.
We continue to experience supply chain challenges, including supplier shortages and performance issues.
6 unchanged sentences
Inflation and higher interest rates can also constrain the overall purchasing power of our customers for our products and services potentially impacting future orders, especially in a budget constrained environment.
−Removed: We remain committed to our ongoing efforts to increase the efficiency of our operations and improve the cost competitiveness and affordability of our products and services, which may, in part, offset cost increases from inflation.
−Removed: For additional risks to the company related to the geopolitical and economic environment, see “Item 1A, Risk Factors” of our 2023 Form 10-K.
+Added: We remain committed to our ongoing efforts to increase the efficiency of our operations and
+Added: improve the cost competitiveness and affordability of our products and services, which may, in part, offset cost increases from inflation.
+Added: For additional risks to the company related to the supply chain and availability of materials, see Part I, Item IA, “Risk Factors” of our 2024 Form 10-K.
+Added: Recent Developments in Trade and Regulatory Policies
+Added: Certain materials and component parts that go into making our products are imported into the U.S.
+Added: and are subject to tariffs, sanctions, embargoes, export and import controls, and other trade restrictions.
+Added: Government is in the process of, or has announced its intent to, increase current tariffs, impose additional tariffs, and expand tariffs on goods imported from various countries.
+Added: For example, in April 2025, the U.S.
+Added: Government imposed broad new tariffs, including a baseline 10% tariff on all imports and a 25% tariff on imports of steel and aluminum products from all countries, and significantly higher tariffs on goods from specific countries such as Canada and Mexico.
+Added: We also export certain products to other countries that may take actions in response to these tariffs.
+Added: For example, Canada has imposed a 25% surtax on certain U.S.
+Added: In addition, recent government actions relating to rare earth minerals used in certain of our products, including U.S.
+Added: Government orders on the import on such minerals and the imposition of export controls on such minerals by China, may constrain the availability of those materials over time.
+Added: Significant changes in tax, trade, or other policies either in the U.S.
+Added: or other countries, as well as any fluctuation in foreign exchange rates as a result of such activity, could materially increase our tax burden, the price we pay for materials and component parts, the price our customers pay, and result in delays in products received or non-delivery from our vendors as well as impact the availability of materials (including rare earth minerals), which could materially impact our business and financial results.
+Added: We are pursuing available options to fully or substantially mitigate the impact of the increased tariffs or any future tariffs, including seeking exclusions, through drawbacks, refunds, recovering the costs in the pricing of our products, or securing alternative sources of materials or products.
+Added: However, there could be a near term impact on cash flows due to the timing of when tariffs are paid compared to when such costs may be refunded or recovered.
+Added: The tariffs that have been enacted or expanded by the U.S.
+Added: or other countries did not materially impact our business or financial results for the quarter ended March 30, 2025.
+Added: We are currently evaluating the potential future impacts of the imposition of the announced tariffs to our business and financial condition.
+Added: At this time, we do not believe that the tariffs announced by the U.S.
+Added: or actions taken in response to these tariffs by other countries will have a material adverse effect upon our results of operations, financial condition, or cash flows.
+Added: However, the actual impact of the new tariffs is subject to a number of factors including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any countermeasures that the target countries may take, how our Tier 1 and Tier 2 suppliers react, possible substitution effects, possible duty drawbacks, and any mitigating actions that may become available.
+Added: In addition, the President has issued multiple Executive Orders, including two that are intended to (i) simplify and accelerate the procurement process through a review and restructuring of the Federal Acquisition Regulation (FAR), and its supplements and (ii) modernize defense acquisitions by promoting commercial solutions, innovative acquisition authorities, and other existing streamlined processes.
+Added: Among the actions directed by the President is a review of major defense acquisition programs that are more than 15% behind schedule or over budget, including identifying any programs for potential cancellation.
+Added: While the impact of these reforms on our business is uncertain, they could potentially lead to changes in the way we interact with the U.S.
+Added: Government, and we will continue to monitor and assess their effects on our business and financial results.
+Added: Should the U.S.
+Added: Government review one or more major defense programs in which we provide products and/or services, and this review leads to a full or partial cancellation of one of these programs, this could have an adverse effect on our business, financial condition, results of operations and cash flows.
+Added: For additional risks to the company related to the geopolitical and economic environment, see Part I, Item 1A, “Risk Factors” of our 2024 Form 10-K.
+Added: Government Budget Environment
+Added: Our primary customer is the U.S.
+Added: Government, from which we derive 72% of our sales, including 63% from the U.S.
+Added: Funding for U.S.
+Added: Government programs is subject to a variety of factors that can affect our business, including the administration’s budget requests and procurement priorities and policies, annual congressional budget authorization and appropriation processes, and other U.S.
+Added: Government domestic and international priorities.
+Added: Government spending levels, particularly defense spending, and timely funding thereof can affect our financial performance over the short and long term.
+Added: On March 15, 2025, the President signed into law the Full-Year Continuing Appropriations and Extensions Act, 2025 (the Act), which funds the U.S.
+Added: Government under a continuing resolution through September 30, 2025, its fiscal year (FY) end.
+Added: In total, the FY 2025 continuing resolution funding is roughly equivalent to the U.S.
+Added: Government’s FY 2024 funding with a few anomalies and other smaller shifts in funding between appropriations titles.
+Added: The Act increases the DoD FY 2025 base budget by $6 billion to a total of $831.5 billion, while reducing nondefense spending.
+Added: Unlike other continuing resulting funding measures, the Act provides the DoD conditional authority to permit new program starts as long as they were included in the FY 2025 House or FY 2025 Senate appropriation bills and $8 billion in flexible funding, furthering the flexibility of DoD operating under a CR.
+Added: It is anticipated the Administration’s budget request for FY 2026 will be submitted to Congress in the coming months, which will initiate the FY 2026 defense authorization and appropriations legislative process.
+Added: Congress will need to approve or revise the Administration’s FY 2026 budget proposal through enactment of appropriations bills and other policy legislation, which would then require final approval from the President in order for the FY 2026 budget to become law and complete the budget process.
+Added: We anticipate the federal budget, debt ceiling, regulatory environment, and potential tax reform will continue to be subject to debate and compromise shaped by, among other things, the new Administration and Congress, heightened political tensions, the global security environment, inflationary pressures, and macroeconomic conditions.
+Added: The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs.
+Added: Additionally, the administration continues to take steps to evaluate government-wide and defense-specific staffing and procurement, which includes assessing mission priorities, procurement methods, program performance, and other factors and then potentially taking action based on those assessments.
+Added: Those actions remain uncertain and could result in impacts to both our current and future business prospects and financial performance.
+Added: See also the discussion of U.S.
+Added: Government funding risks, in Part I, Item 1A, “Risk Factors” included in our 2024 Form 10-K.
CONSOLIDATED RESULTS OF OPERATIONS
6 unchanged sentences
Our consolidated results of operations were as follows (in millions, except per share data):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 29,
−Removed: 2024 September 24,
−Removed: 2023 September 29,
−Removed: 2024 September 24,
−Removed: Net sales $ 17,104 $ 16,878 $ 52,421 $ 48,697
−Removed: Cost of sales (14,987) (14,830) (46,181) (42,513)
+Added: Quarters Ended
+Added: 2025 March 31,
+Added: Sales $ 17,963 $ 17,195
+Added: Operating costs and expenses (15,640) (15,202)
Gross profit 2,323 1,993
−Removed: Other income (expense), net 23 (6) 77 30
+Added: Other income, net 49 36
Operating profit 2,372 2,029
Interest expense (268) (255)
−Removed: Non-service FAS pension income 16 111 47 332
+Added: Non-service FAS pension (expense) income (98) 16
Other non-operating income, net 30 45
3 unchanged sentences
Diluted earnings per common share $ 7.28 $ 6.39
−Removed: Certain amounts reported in other income (expense), net, including our share of earnings or losses from equity method investees, are included in the operating profit of our business segments.
+Added: Certain amounts reported in other income, net, including our share of earnings or losses from equity method investees, are included in the operating profit of our business segments.
Accordingly, such amounts are included in the discussion of our business segment results of operations.
We generate sales from the delivery of products and services to our customers.
−Removed: Our consolidated net sales were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 29,
−Removed: 2024 September 24,
−Removed: 2023 September 29,
−Removed: 2024 September 24,
+Added: Our consolidated sales were as follows (in millions):
+Added: Quarters Ended
+Added: 2025 March 31,
Products $ 14,936 $ 14,196
−Removed: % of total net sales 84.6 % 83.0 % 83.5 % 82.8 %
+Added: % of total sales 83.1 % 82.6 %
Services 3,027 2,999
−Removed: % of total net sales 15.4 % 17.0 % 16.5 % 17.2 %
−Removed: Total net sales $ 17,104 $ 16,878 $ 52,421 $ 48,697
+Added: % of total sales 16.9 % 17.4 %
+Added: Total sales $ 17,963 $ 17,195
Substantially all of our contracts are accounted for using the percentage-of-completion cost-to-cost method.
−Removed: Under the percentage-of-completion cost-to-cost method, we record net sales on contracts over time based upon our progress towards completion on a particular contract, as well as our estimate of the profit to be earned at completion.
−Removed: The following discussion of material changes in our consolidated net sales should be read in tandem with the subsequent discussion of changes in our consolidated cost of sales and our business segment results of operations because changes in our sales are typically accompanied by a corresponding change in our cost of sales due to the nature of the percentage-of-completion cost-to-cost method.
+Added: Under the percentage-of-completion cost-to-cost method, we record sales on contracts over time based upon our progress towards completion on a particular contract, as well as our estimate of the profit to be earned at completion.
+Added: The following discussion of material changes in our consolidated sales should be read in tandem with the subsequent discussion of changes in our consolidated operating costs and expenses and our business segment results of operations because changes in our sales are typically accompanied by a corresponding change in our operating costs and expenses due to the nature of the percentage-of-completion cost-to-cost method.
Product Sales
−Removed: Product sales increased $458 million, or 3%, during the quarter ended September 29, 2024, compared to the same period in 2023.
−Removed: The increase was primarily attributable to higher product sales of $305 million at RMS and $200 million at MFC.
−Removed: Higher product sales at RMS were due to higher volume across the integrated warfare systems and sensors (IWSS) portfolio.
−Removed: Higher product sales at MFC were due to production ramp up on Guided Multiple Launch Rocket Systems (GMLRS) and Long Range Anti-Ship Missile (LRASM) programs.
−Removed: Product sales increased $3.5 billion, or 9%, during the nine months ended September 29, 2024, compared to the same period in 2023.
−Removed: The increase was primarily attributable to higher product sales of $1.4 billion at RMS, $1.1 billion at MFC and $775 million at Aeronautics.
−Removed: Higher product sales at RMS were primarily within the IWSS portfolio due to higher volume on radar programs and new program ramp up within the laser systems portfolio.
−Removed: Higher product sales at MFC were due to production ramp up on GMLRS, High Mobility Artillery Rocket System (HIMARS), Joint Air-to-Surface Standoff Missile (JASSM) and LRASM programs.
−Removed: Higher product sales at Aeronautics were due to higher volume on F-35 and F-16 production contracts along with growth on classified programs.
+Added: Product sales increased $740 million, or 5%, during the quarter ended March 30, 2025, compared to the same period in 2024.
+Added: The increase was primarily attributable to higher product sales of approximately $355 million at MFC, $255 million at RMS and $155 million at Aeronautics.
+Added: Higher product sales at MFC were due to production ramp-up on Joint Air-to-Surface Standoff Missile (JASSM), Long Range Anti-Ship Missile (LRASM), and precision fires programs.
+Added: Higher product sales at RMS were due to higher volume on the Canadian Surface Combatant (CSC) and Black Hawk programs.
+Added: Higher product sales at Aeronautics were due to higher volume on F-35 production contracts.
Service Sales
−Removed: Service sales decreased $232 million, or 8%, during the quarter ended September 29, 2024, compared to the same period in 2023.
−Removed: The decrease was primarily attributable to lower service sales of approximately $240 million at Aeronautics due to lower volume on F-35 sustainment contracts.
−Removed: Service sales increased $245 million, or 3%, during the nine months ended September 29, 2024, compared to the same period in 2023.
−Removed: The increase was primarily attributable to higher service sales of approximately $135 million at Space and $55 million at RMS.
−Removed: Higher service sales at Space were due to higher volume on national security space services, while higher service sales at RMS were due to higher volume across the portfolio.
−Removed: Cost of Sales
−Removed: Cost of sales, for both products and services, consist of materials, labor, subcontracting costs and an allocation of indirect costs (overhead and general and administrative), as well as the costs to fulfill our industrial cooperation agreements, sometimes referred to as offset agreements, required under certain contracts with international customers.
+Added: Service sales during the quarter ended March 30, 2025 were comparable to the same period in 2024.
+Added: Operating Costs and Expenses
+Added: Operating costs and expenses, for both products and services, consist of materials, labor, subcontracting costs and an allocation of indirect costs (overhead and general and administrative), as well as the costs to fulfill our industrial cooperation agreements, sometimes referred to as offset agreements, required under certain contracts with international customers.
For each of our contracts, we monitor the nature and amount of costs at the contract level, which form the basis for estimating our total costs to complete the contract.
−Removed: Our consolidated cost of sales were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 29,
−Removed: 2024 September 24,
−Removed: 2023 September 29,
−Removed: 2024 September 24,
−Removed: Cost of sales – products $ (12,964) $ (12,571) $ (39,368) $ (35,960)
+Added: Our consolidated operating costs and expenses were as follows (in millions):
+Added: Quarters Ended
+Added: 2025 March 31,
+Added: Operating costs and expenses – products $ (13,284) $ (12,884)
% of product sales 88.9 % 90.8 %
−Removed: Cost of sales – services (2,272) (2,510) (7,457) (7,436)
+Added: Operating costs and expenses – services (2,640) (2,603)
% of service sales 87.2 % 86.8 %
−Removed: Impairment and severance charges — — (87) —
Other unallocated, net 284 285
−Removed: Total cost of sales $ (14,987) $ (14,830) $ (46,181) $ (42,513)
−Removed: The following discussion of material changes in our consolidated cost of sales for products and services should be read in tandem with the preceding discussion of changes in our consolidated net sales and our business segment results of operations.
−Removed: Except for potential impacts to our programs resulting from supply chain disruptions and inflation, we have not identified any additional developing trends in cost of sales for products and services that would have a material impact on our future operations.
+Added: Total operating costs and expenses $ (15,640) $ (15,202)
+Added: The following discussion of material changes in our consolidated operating costs and expenses for products and services should be read in tandem with the preceding discussion of changes in our consolidated sales and our business segment results of operations.
+Added: Except for potential impacts to our programs resulting from supply chain disruptions, inflation, and tariffs, we have not identified any additional developing trends in operating costs and expenses for products and services that could have a material impact on our future operations.
Product Costs
−Removed: Product costs increased $393 million, or 3%, during the quarter ended September 29, 2024, compared to the same period in 2023.
−Removed: The increase was primarily attributable to higher product costs of approximately $290 million at RMS and $145 million at MFC due to higher volume and production ramp up as described above in “Product Sales”.
−Removed: Product costs increased $3.4 billion, or 9%, during the nine months ended September 29, 2024, compared to the same period in 2023.
−Removed: The increase was primarily attributable to higher product costs of approximately $1.4 billion at RMS, $1.1 billion at MFC and $795 million at Aeronautics.
−Removed: Higher product costs at RMS and MFC were due to production ramp up and higher volume as described above in “Product Sales”.
−Removed: Higher product costs at Aeronautics was due to higher volume as described above in “Product Sales” and unfavorable profit rate adjustments on a classified program because of higher than anticipated costs to achieve program objectives.
+Added: Product costs increased $400 million, or 3%, during the quarter ended March 30, 2025, compared to the same period in 2024.
+Added: The increase was primarily attributable to higher product costs of approximately $200 million at MFC, $195 million at RMS and $115 million at Aeronautics.
+Added: Higher product costs at MFC, RMS and Aeronautics were due to higher volume and production ramp up as described above in “Product Sales”.
Service Costs
−Removed: Service costs decreased $238 million, or 9%, during the quarter ended September 29, 2024, compared to the same period in 2023.
−Removed: The decrease was primarily attributable to lower service costs $240 million at Aeronautics.
−Removed: Lower service costs at Aeronautics were due to lower volume as described above in “Service Sales”.
−Removed: Service costs during the nine months ended September 29, 2024 were comparable to the same period in 2023.
−Removed: Service costs at RMS in 2023 included an unfavorable profit adjustment on the Canadian Maritime Helicopter Program (CMHP) that did not recur in 2024, which was offset by higher volume at Space as described above in “Service Sales”.
−Removed: Impairment and Severance Charges
−Removed: During the second quarter of 2024, we recorded charges totaling $87 million ($69 million, or $0.29 per share, after-tax).
−Removed: See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.
+Added: Service costs during the quarter ended March 30, 2025 were comparable to the same period in 2024.
Other Unallocated, Net
−Removed: Other unallocated, net primarily includes the FAS/CAS pension operating adjustment (which represents the difference between total CAS pension cost recorded in our business segments’ results of operations and the service cost component of Financial Accounting Standards (FAS) pension income (expense)), stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, intangible asset amortization expense and other corporate costs.
−Removed: These items are not allocated to the business segments and, therefore, are not allocated to cost of sales for products or services.
−Removed: Other unallocated, net reduced cost of sales by $249 million and $731 million during the quarter and nine months ended September 29, 2024, compared to $251 million and $883 million during the quarter and nine months ended September 24, 2023.
−Removed: The decrease in other unallocated, net was primarily due to lower gains from the changes in the fair value of assets and liabilities related to deferred compensation plans during the nine months ended September 29, 2024 compared to the same periods in 2023 and fluctuations in costs associated with various corporate items, none of which were individually significant.
−Removed: Other Income (Expense), Net
−Removed: Other income, net was $23 million and $77 million during the quarter and nine months ended September 29, 2024, compared to other expense, net of $6 million and other income, net of $30 million during the quarter and nine months ended September 24, 2023.
−Removed: Other income (expense), net, primarily includes earnings generated by equity method investees, as well as gains or losses for acquisitions, divestitures, and other items, none of which are individually significant.
+Added: Other unallocated, net primarily includes the FAS/CAS pension operating adjustment (which represents the difference between total CAS pension cost recorded in our business segments’ results of operations and the service cost component of FAS pension (expense) income), stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, intangible asset amortization expense and other corporate costs.
+Added: These items are not allocated to the business segments and, therefore, are not allocated to operating costs and expenses for products or services.
+Added: Other unallocated, net reduced operating expenses by $284 million and $285 million during the quarters ended March 30, 2025 and March 31, 2024.
+Added: Other Income, Net
+Added: Other income, net was $49 million and $36 million during the quarters ended March 30, 2025 and March 31, 2024.
+Added: Other income, net, primarily includes earnings generated by equity method investees, as well as gains or losses for
+Added: acquisitions, divestitures, and other items, none of which are individually significant.
+Added: The increase in other income, net during the quarter ended March 30, 2025 resulted primarily from an intellectual property license arrangement.
Interest Expense
−Removed: Interest expense was $256 million and $772 million and $237 million and $662 million during the quarters and nine months ended September 29, 2024 and September 24, 2023.
−Removed: The increase in interest expense in 2024 resulted primarily from the issuance of senior unsecured notes in January 2024 and May 2023.
−Removed: Non-service FAS pension income
−Removed: Non-service FAS pension income was $16 million and $47 million and $111 million and $332 million during the quarters and nine months ended September 29, 2024 and September 24, 2023.
−Removed: The decrease was primarily due to a
−Removed: lower prior service credit amortization and a reduced asset base as detailed in “Note 6 - Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements.
+Added: Interest expense was $268 million and $255 million during the quarters ended March 30, 2025 and March 31, 2024.
+Added: The increase in interest expense in 2025 resulted primarily from the issuance of senior unsecured notes in January and December 2024.
+Added: Non-service FAS pension (expense) income
+Added: Non-service FAS pension expense was $98 million during the quarter ended March 30, 2025, compared to non-service FAS pension income of $16 million during the quarter ended March 31, 2024.
+Added: The increase in expense was primarily due to higher prior service cost amortization and a reduced asset base as detailed in “Note 6 - Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements.
Other non-operating income, net
−Removed: Other non-operating income, net primarily includes gains or losses related to changes in the fair value of early-stage company investments or gains or losses upon sale of these investments.
−Removed: Other non-operating income, net was $18 million and $109 million and $37 million and $69 million during the quarters and nine months ended September 29, 2024 and September 24, 2023.
−Removed: See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.
+Added: Other non-operating income, net primarily includes gains or losses related to adjustments in valuation of early-stage company investments or gains or losses upon the sale of these investments and interest income earned on cash and cash equivalents.
+Added: Other non-operating income, net was $30 million and $45 million during the quarters ended March 30, 2025 and March 31, 2024.
+Added: See “Note 8 - Fair Value Measurements” included in our Notes to Consolidated Financial Statements for additional information.
Income Tax Expense
−Removed: Our effective income tax rates were 15.4% and 15.6% for the quarter and nine months ended September 29, 2024 and 13.8% and 15.1% for the quarter and nine months ended September 24, 2023.
−Removed: The rate for the third quarter 2024 was higher than the rate for the third quarter 2023 primarily due to additional research and development tax credits that were claimed for years prior to 2023 reflected in the 2023 rate.
−Removed: The rates for all periods benefited from research and development tax credits, tax deductions for foreign derived intangible income and dividends paid to our defined contribution plans with an employee stock ownership plan feature.
+Added: Our effective income tax rates were 15.9% and 15.8% for the quarters ended March 30, 2025 and March 31, 2024.
+Added: 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.
Changes in U.S.
4 unchanged sentences
The actual impact on 2025 cash tax liability will depend on the amount of research and development expenses paid or incurred in 2025 among other factors.
−Removed: The cash tax impact will continue over the five-year amortization period but will decrease over the period and be immaterial by 2027.
−Removed: We are regularly under audit or examination by tax authorities, including foreign tax authorities (Australia, Canada, India, Italy, Japan, Poland, the United Kingdom, and other countries).
−Removed: The final determination of tax audits and any related litigation could similarly result in unanticipated increases in our tax expense and affect profitability and cash flows.
−Removed: The Organisation for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2), with certain aspects of Pillar 2 effective January 1, 2024 and other aspects effective January 1, 2025.
−Removed: While it is uncertain whether the United States will enact legislation to adopt Pillar 2, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar 2.
−Removed: We do not expect Pillar 2 to have a material impact on our effective tax rate or our consolidated results of operation, financial position, and cash flows.
−Removed: We reported net earnings of $1.6 billion ($6.80 per share) and $4.8 billion ($20.05 per share) during the quarter and nine months ended September 29, 2024, compared to $1.7 billion ($6.73 per share) and $5.1 billion ($19.97 per share) during the quarter and nine months ended September 24, 2023.
−Removed: Net earnings and earnings per share for the quarter and nine months ended September 29, 2024 were affected by the factors mentioned above.
−Removed: Earnings per share also benefited from a net decrease of approximately 11.6 million and 13.2 million weighted average common shares outstanding during the quarter and nine months ended September 29, 2024, compared to the same periods in 2023.
+Added: While the largest impact of this provision was to the 2022 cash tax liability, the impact will continue over the five-year amortization period, but will decrease over the period and be immaterial by 2027.
+Added: We are regularly under audit or examination by tax authorities, including U.S.
+Added: and foreign tax authorities (Australia, Canada, India, Italy, Japan, Poland, the United Kingdom, and other countries).
+Added: The final resolution of tax audits and any related administrative reviews or litigation could result in unanticipated increases in our tax expense and changes to the timing of required tax payments, which could affect profitability and cash flows for any particular reporting period.
+Added: These increases or changes could have a material impact on financial condition and results of operations in such period.
+Added: The Organisation for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% applied on a country-by-country basis for companies with global revenues and profits above certain thresholds (referred to as Pillar 2), with certain aspects of Pillar 2 effective January 1, 2024 and other aspects effective January 1, 2025.
+Added: While the United States has not enacted legislation to adopt Pillar 2 and it is uncertain if it will do so in the future, certain countries in which we operate have enacted such legislation, and other countries are in the process of doing so.
+Added: We do not expect Pillar 2 to have a material impact on our effective tax rate or our financial condition and results of operations.
+Added: We reported net earnings of $1.7 billion ($7.28 per share) and $1.5 billion ($6.39 per share) during the quarters ended March 30, 2025 and March 31, 2024.
+Added: Net earnings and earnings per share for the quarter ended March 30, 2025 were affected by the factors mentioned above.
+Added: Earnings per share also benefited from a net decrease of approximately 6.3 million weighted average common shares outstanding during the quarter ended March 30, 2025, compared to the same period in 2024.
The reduction in weighted average common shares was a result of share repurchases, partially offset by share issuance under our stock-based awards and certain defined contribution plans.
BUSINESS SEGMENT RESULTS OF OPERATIONS
−Removed: We operate in four business segments:
−Removed: Aeronautics, MFC, RMS and Space.
−Removed: We organize our business segments based on the nature of products and services offered.
−Removed: 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.
−Removed: 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.
+Added: Our operations are organized into four business segments, which also comprise our reportable segments:
+Added: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space.
+Added: We generally organize our business segments based on the nature of products and services offered.
Business segment operating profit excludes the FAS/CAS pension operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S.
3 unchanged sentences
Sales and operating profit for each of our business segments were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 29,
−Removed: 2024 September 24,
−Removed: 2023 September 29,
−Removed: 2024 September 24,
+Added: Quarters Ended
+Added: 2025 March 31,
Aeronautics $ 7,057 $ 6,845
2 unchanged sentences
Space 3,205 3,269
−Removed: Total net sales $ 17,104 $ 16,878 $ 52,421 $ 48,697
+Added: Total sales $ 17,963 $ 17,195
Operating profit
6 unchanged sentences
FAS/CAS pension operating adjustment 379 406
−Removed: Impairment and severance charges (a)
Intangible asset amortization expense (64) (61)
2 unchanged sentences
Total consolidated operating profit $ 2,372 $ 2,029
−Removed: (a) See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.
−Removed: Our business segments’ results of operations include pension expense only as calculated under CAS, which we refer to as CAS pension cost.
+Added: Segment results exclude intersegment transactions as these activities are eliminated in consolidation and are not considered in assessing the performance of each segment.
+Added: 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.
+Added: Our business segment results of operations include pension expense as calculated under CAS, which we refer to as CAS pension cost.
We recover CAS pension and other postretirement benefit plan cost through the pricing of our products and services on U.S.
−Removed: Government contracts and, therefore, recognize CAS pension cost in each of our business segments’ net sales and cost of sales.
−Removed: 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.
−Removed: 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.
−Removed: The non-service FAS pension income components are included in non-service FAS pension income in our consolidated statements of earnings.
−Removed: 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.
−Removed: The total FAS/CAS pension adjustments, including the service and non-service cost components of FAS pension income for our qualified defined benefit pension plans, were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 29,
−Removed: 2024 September 24,
−Removed: 2023 September 29,
−Removed: 2024 September 24,
−Removed: Total FAS income and CAS cost
−Removed: FAS pension income $ 1 $ 94 $ 2 $ 283
+Added: Government contracts and, therefore, recognize CAS pension cost in each business segments’ sales and operating costs and expenses.
+Added: Our consolidated financial statements must present pension and other postretirement benefit plan (expense) income calculated in accordance with Financial Accounting Standards (FAS)
+Added: requirements under U.S.
+Added: The FAS/CAS pension operating adjustment represents the difference between CAS pension cost included in segment operating income and the service cost component of FAS pension (expense) income included in consolidated operating profit.
+Added: To the extent that CAS pension cost exceeds the service cost component of FAS pension (expense) income we have a favorable FAS/CAS pension operating adjustment.
+Added: The non-service FAS pension (expense) income components are included in non-service FAS pension (expense) income on our consolidated statements of earnings.
+Added: The total FAS/CAS pension adjustments, including the service and non-service cost components of FAS pension (expense) income for our qualified defined benefit pension plans, were as follows (in millions):
+Added: Quarters Ended
+Added: 2025 March 31,
+Added: Total FAS (expense) income and CAS cost
+Added: FAS pension (expense) income $ (111) $ 1
CAS pension cost 392 421
4 unchanged sentences
Total FAS/CAS pension operating adjustment 379 406
−Removed: Non-service FAS pension income 16 111 47 332
+Added: Non-service FAS pension (expense) income (98) 16
Total FAS/CAS pension adjustment $ 281 $ 422
−Removed: Management evaluates performance on our contracts by focusing on net sales and operating profit and not by type or amount of operating expense.
−Removed: Consequently, our discussion of business segment performance focuses on net sales and operating profit, consistent with our approach for managing the business.
−Removed: This approach is consistent throughout the life cycle of our contracts, as management assesses the bidding of each contract by focusing on net sales and operating profit and monitors performance on our contracts in a similar manner through their completion.
+Added: Management evaluates performance on our contracts by focusing on sales and operating profit and not by type or amount of operating expense.
+Added: Consequently, our discussion of business segment performance focuses on sales and operating profit, consistent with our approach for managing the business.
+Added: This approach is consistent throughout the life cycle of our contracts, as management assesses the bidding of each contract by focusing on sales and operating profit and monitors performance on our contracts in a similar manner through their completion.
We regularly provide customers with reports of our costs as the contract progresses.
7 unchanged sentences
We have a number of programs that are designated as classified by the U.S.
−Removed: Government, which cannot be specifically described.
−Removed: The operating results of these classified programs are included in our consolidated and business segment results and are subjected to the same oversight and internal controls as our other programs.
−Removed: Our net sales are primarily derived from long-term contracts for products and services provided to the U.S.
+Added: Government, and that cannot be specifically described.
+Added: The operating results of these classified programs are included in our consolidated and business segment results and are subject to the same oversight and internal controls as our other programs.
+Added: Our sales are primarily derived from long-term contracts for products and services provided to the U.S.
Government as well as FMS contracted through the U.S.
3 unchanged sentences
Many of our contracts span several years and include highly complex technical requirements.
−Removed: At the outset of a contract accounted for under the percentage-of-completion cost-to-cost method, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract and assess the effects of those risks on our estimates of sales and total costs to complete the contract, as well as our ability to earn variable consideration.
+Added: At the outset of a contract accounted for under the percentage-of-completion cost-to-cost method, we identify and monitor risks to the
+Added: achievement of the technical, schedule and cost aspects of the contract and assess the effects of those risks on our estimates of sales and total costs to complete the contract, as well as our ability to earn variable consideration.
The estimates consider the technical requirements (e.g., a newly developed product versus a mature product), the schedule and associated tasks (e.g., the number and type of milestone events) and costs (e.g., material, labor, subcontractor, overhead and the estimated costs to fulfill our industrial cooperation agreements, sometimes referred to as offset or localization agreements, required under certain contracts with international customers).
The initial profit booking rate of each contract considers risks surrounding the ability to achieve the technical requirements, schedule and costs in the initial estimated total costs to complete the contract and variable considerations.
−Removed: Profit booking rates may increase during
−Removed: the performance of the contract if we successfully retire risks related to the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract or may increase the variable consideration we expect to receive on the contract.
+Added: Profit booking rates may increase during the performance of the contract if we successfully retire risks related to the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract or may increase the variable consideration we expect to receive on the contract.
Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase or our estimates of variable consideration we expect to receive decrease.
2 unchanged sentences
For further discussion on fixed-price contracts, see “ Note 10 - Other ” included in our Notes to Consolidated Financial Statements.
−Removed: Changes in net sales and operating profit generally are expressed in terms of volume, contract mix, and/or performance (referred to as profit booking rate adjustments).
+Added: Changes in sales and operating profit generally are expressed in terms of volume, contract mix, and/or performance (referred to as profit booking rate adjustments).
Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts.
Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract.
−Removed: Contract mix refers to changes in the ratio of contract type or life cycle (e.g., cost-type, fixed-price, development, production and/or sustainment).
+Added: Contract mix primarily refers to changes in the ratio of contract type or life cycle (e.g., cost-type, fixed-price, development, production and/or sustainment) and other cost recoveries.
Comparability of our segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on our contracts.
−Removed: 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.
−Removed: 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 booking rate adjustments.
−Removed: 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.
−Removed: 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.
−Removed: Favorable items include the positive resolution of contractual matters, cost recoveries on severance and restructuring, insurance recoveries and gains on sales of assets.
−Removed: Unfavorable items include the adverse resolution of contractual matters;
−Removed: supply chain disruptions;
−Removed: restructuring charges (except for significant severance actions, which are excluded from segment operating results);
−Removed: reserves for disputes;
−Removed: certain asset impairments;
−Removed: and losses on sales of certain assets.
−Removed: Our consolidated net profit booking rate adjustments increased segment operating profit by approximately $375 million and $990 million during the quarter and nine months ended September 29, 2024 and $335 million and $1.1 billion during the quarter and nine months ended September 24, 2023.
−Removed: The impact to the quarter ended September 29, 2024 segment operating profit includes losses of $80 million on a classified program at our Aeronautics business segment resulting in total losses of $145 million on this classified program for the nine months ended September 29, 2024.
−Removed: The impact to the nine months ended September 29, 2024 segment operating profit also includes a reach-forward loss of $100 million recognized in the first quarter of 2024 on a classified program at our MFC business segment.
−Removed: The impact to the nine months ended September 24, 2023 included an unfavorable profit adjustment of $100 million on CMHP and a $65 million favorable profit adjustment as a result of a positive resolution of a contractual matter on an international surveillance and control program at our RMS business segment.
−Removed: See the discussions under “Contract Estimates” in “Note 10 - Other” included in our Notes to Consolidated Financial Statements (pages 24-25).
−Removed: We periodically experience performance issues and record losses for certain programs.
−Removed: For further discussion on programs, see “Note 10 - Other” included in our Notes to Consolidated Financial Statements.
+Added: The following table presents the effect of our consolidated net profit booking rate adjustments on segment operating profit (in millions):
+Added: Quarters Ended
+Added: 2025 March 31,
+Added: Aeronautics $ 110 $ 90
+Added: Missiles and Fire Control 130 (5)
+Added: Rotary and Mission Systems 85 40
+Added: Total business segment operating profit 480 195
+Added: During the quarter ended March 30, 2025, we recorded $185 million of adjustments resulting from favorable performance upon completion on certain commercial civil space programs at Space and a classified program at Aeronautics.
+Added: During the quarter ended March 31, 2024, we recognized a reach-forward loss of $100 million on a classified
+Added: program at our MFC business segment.
+Added: On March 26, 2025, the U.S.
+Added: Air Force selected a competitor for the Next Generation Air Dominance (NGAD) competition.
+Added: We are currently evaluating the potential effect of this decision on our business operations, including assessing the recoverability of certain assets and other costs.
Summary operating results for our Aeronautics business segment were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 29,
−Removed: 2024 September 24,
−Removed: 2023 September 29,
−Removed: 2024 September 24,
−Removed: Net sales $ 6,487 $ 6,717 $ 20,609 $ 19,861
+Added: Quarters Ended
+Added: 2025 March 31,
+Added: Sales $ 7,057 $ 6,845
Operating profit 720 679
Operating margin 10.2 % 9.9 %
−Removed: Aeronautics’ net sales during the quarter ended September 29, 2024 decreased $230 million , or 3% , compared to the same period in 2023.
−Removed: The decrease was primarily attributable to lower net sales of $480 million on the F-35 program due to lower volume on production contracts as a result of delays in receiving additional contractual authorization and funding under the Lots 18-19 contract.
−Removed: This decrease was partially offset by higher net sales of $120 million on the C-130 program primarily due to higher volume on production and sustainment contracts;
−Removed: and $85 million on the F-16 program due to the ramp up on production.
−Removed: Aeronautics’ operating profit during the quarter ended September 29, 2024 decreased $12 million, or 2%, compared to the same period in 2023.
−Removed: The decrease in operating profit was attributable to $25 million from lower volume described above and $20 million from unfavorable contract mix, partially offset by $30 million of higher profit booking rate adjustments.
−Removed: The increase in profit booking rate adjustments included an $85 million favorable profit rate adjustment for a claim associated with a contract to modernize and install new engines in C-5 Galaxy aircraft, partially offset by $80 million of unfavorable profit rate adjustments on a classified program due to higher than anticipated costs to achieve program objectives .
−Removed: Aeronautics’ net sales during the nine months ended September 29, 2024 increased $748 million, or 4%, compared to the same period in 2023.
−Removed: The increase was primarily attributable to higher net sales of $250 million on the F-16 program due to the ramp up on production;
−Removed: $185 million on classified programs driven by higher volume;
−Removed: and $160 million on the F-35 program due to higher volume on development and sustainment contracts.
−Removed: These increases were partially offset by lower volume on production contracts as a result of delays in receiving additional contractual authorization and funding under the Lots 18-19 contract.
−Removed: Aeronautics’ operating profit during the nine months ended September 29, 2024 increased $25 million , or 1%, compared to the same period in 2023.
−Removed: The increase in operating profit was attributable to $70 million from higher volume and program ramp up described above, partially offset by $35 million of lower profit booking rate adjustments.
−Removed: The decrease in profit booking rate adjustments was due to $145 million of unfavorable profit rate adjustments on a classified program because of higher than anticipated costs to achieve program objectives, partially offset by an $85 million favorable profit rate adjustment for a claim associated with a C-5 Galaxy contract as described above.
+Added: Aeronautics’ sales during the quarter ended March 30, 2025 increased $212 million , or 3% , compared to the same period in 2024 .
+Added: This increase was primarily driven by a $215 million increase in sales from the F-35 program, resulting from higher volume on production contracts .
+Added: Aeronautics’ operating profit during the quarter ended March 30, 2025 increased $41 million , or 6% , compared to the same period in 2024 .
+Added: This increase was attributable to two main factors:
+Added: a $20 million increase in profit booking rate adjustments and a $20 million increase from higher volume, as described above.
+Added: The increase in profit booking rate adjustments was primarily d ue to an $80 million adjustment resulting from favorable performance at completion on a classified program, p artially offset by lower profit rate adjustments on C-130 programs .
Missiles and Fire Control
Summary operating results for our MFC business segment were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 29,
−Removed: 2024 September 24,
−Removed: 2023 September 29,
−Removed: 2024 September 24,
−Removed: Net sales $ 3,175 $ 2,939 $ 9,270 $ 8,082
+Added: Quarters Ended
+Added: 2025 March 31,
+Added: Sales $ 3,373 $ 2,993
Operating profit 465 311
Operating margin 13.8 % 10.4 %
−Removed: MFC’s net sales during the quarter ended September 29, 2024 increased $236 million , or 8% , compared to the same period in 2023.
−Removed: The increase was primarily attributable to higher net sales of $285 million for tactical and strike missile programs due to production ramp up on Guided Multiple Launch Rocket Systems (GMLRS) and Long Range Anti-Ship Missile (LRASM) programs.
−Removed: This increase was partially offset by lower net sales of $90 million for integrated air and missile defense programs due to lower volume on Patriot Advanced Capability-3 (PAC-3) and Terminal High Altitude Area Defense (THAAD).
−Removed: MFC’s operating profit during the quarter ended September 29, 2024 increased $58 million, or 15%, compared to the same period in 2023.
−Removed: The increase in operating profit was attributable to $35 million of higher profit booking rate adjustments and $20 million from volume described above.
−Removed: The increase in profit booking rate adjustments was primarily due to higher favorable profit rate adjustments on PAC-3 as a result of better than anticipated cost performance.
−Removed: MFC’s net sales during the nine months ended September 29, 2024 increased $1.2 billion, or 15%, compared to the same period in 2023.
−Removed: The increase was primarily attributable to higher net sales of $1.1 billion for tactical and strike missile programs due to production ramp up on GMLRS, LRASM and Javelin programs.
−Removed: MFC’s operating profit during the nine months ended September 29, 2024 increased $71 million, or 6%, compared to the same period in 2023.
−Removed: The increase in operating profit was attributable to $130 million from the production ramp up described above, partially offset by $55 million related to unfavorable contract mix .
−Removed: P rofit booking rate adjustments were comparable as a $100 million reach-forward loss recognized in the first quarter of 2024 for an option on a classified program was offset by higher favorable profit rate adjustments, primarily on PAC-3 and multiple sensors and global sustainment programs due to better than anticipated cost performance.
+Added: MFC’s sales during the quarter ended March 30, 2025 increased $380 million , or 13% , compared to the same period in 2024 .
+Added: This increase was primarily driven by a $370 million increase in sales from tactical and strike missile programs, resulting from production ramp-up on JASSM, LRASM, and precision fires programs .
+Added: MFC’s operating profit during the quarter ended March 30, 2025 increased $154 million, or 50%, compared to the same period in 2024.
+Added: This increase was attributable to two main factors:
+Added: a $135 million increase in profit booking rate adjustments and a $25 million increase from production ramp-up, as described above.
+Added: The increase in profit booking rate adjustments was primarily due to a $100 million reach-forward loss for a classified program and an unfavorable profit adjustment on Hellfire recognized in the first quarter of 2024 that did not recur, partially offset by lower favorable profit adjustments on Patriot Advanced Capability-3 (PAC-3).
Rotary and Mission Systems
Summary operating results for our RMS business segment were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 29,
−Removed: 2024 September 24,
−Removed: 2023 September 29,
−Removed: 2024 September 24,
−Removed: Net sales $ 4,367 $ 4,121 $ 13,003 $ 11,528
+Added: Quarters Ended
+Added: 2025 March 31,
+Added: Sales $ 4,328 $ 4,088
Operating profit 521 430
Operating margin 12.0 % 10.5 %
−Removed: RMS’ net sales during the quarter ended September 29, 2024 increased $246 million, or 6%, compared to the same period in 2023.
−Removed: The increase was primarily attributable to higher net sales of $185 million on integrated warfare systems and sensors (IWSS) programs due to higher volume on radar programs and the Canadian Surface Combatant (CSC) program;
−Removed: and $50 million for Sikorsky helicopter programs due to higher production volume on CH-53K, Seahawk and Black Hawk programs.
−Removed: RMS’ operating profit during the quarter ended September 29, 2024 was comparable to the same period in 2023 as a $25 million increase due to the higher volume described above was offset by $25 million of lower profit booking rate adjustments.
−Removed: The decrease in profit booking rate adjustments was primarily due to a reach-forward loss recognized on a radar program as a result of additional quantity ordering risk identified on fixed-price options.
−Removed: RMS’ net sales during the nine months ended September 29, 2024 increased $1.5 billion, or 13%, compared to the same period in 2023.
−Removed: The increase was primarily attributable to higher net sales of $900 million on IWSS programs due to higher volume on radar programs and the CSC program, and new program ramp up within the laser systems portfolio;
−Removed: $310 million for Sikorsky helicopter programs due to higher production volume on CH-53K, Black Hawk and Seahawk programs;
−Removed: and $250 million for various C6ISR programs due to higher volume.
−Removed: RMS’ operating profit during the nine months ended September 29, 2024 increased $122 million, or 9%, compared to the same period in 2023.
−Removed: The increase in operating profit was attributable to $145 million from higher volume and program ramp up described above and $10 million from favorable contract mix, partially offset by $75 million of lower profit booking rate adjustments.
−Removed: The decrease in profit booking rate adjustments was due to unfavorable profit rate adjustments on Seahawk and Black Hawk production programs, partially offset by the net impact in 2023 of both a $100 million unfavorable profit rate adjustment on CMHP and a $65 million favorable profit rate adjustment on an international surveillance and control program that did not recur in 2024.
+Added: RMS’ sales during the quarter ended March 30, 2025 increased $240 million, or 6%, compared to the same period in 2024.
+Added: This increase was primarily driven by a $145 million increase in sales from integrated warfare systems and sensors (IWSS) programs due to higher volume on the CSC and radar programs;
+Added: and a $125 million increase from Sikorsky helicopter programs due to higher production volume on Black Hawk programs.
+Added: RMS’ operating profit during the quarter ended March 30, 2025 increased $91 million, or 21%, compared to the same period in 2024.
+Added: This increase was attributable to three main factors:
+Added: a $45 million increase in profit booking rate adjustments, a $25 million increase from favorable contract mix and cost recoveries, and a $20 million increase from higher volume, as described above.
+Added: The increase in profit booking rate adjustments was primarily due to unfavorable profit adjustments on Seahawk programs in the first quarter of 2024 that did not recur.
+Added: The increase in favorable contract mix and cost recoveries includes a $50 million intellectual property license arrangement .
Summary operating results for our Space business segment were as follows (in millions):
−Removed: Quarters Ended Nine Months Ended
−Removed: September 29,
−Removed: 2024 September 24,
−Removed: 2023 September 29,
−Removed: 2024 September 24,
−Removed: Net sales $ 3,075 $ 3,101 $ 9,539 $ 9,226
+Added: Quarters Ended
+Added: 2025 March 31,
+Added: Sales $ 3,205 $ 3,269
Operating profit 379 325
Operating margin 11.8 % 9.9 %
−Removed: Space’s net sales during the quarter ended September 29, 2024 decreased $26 million, or 1%, compared to the same period in 2023.
−Removed: The decrease was primarily attributable to lower net sales of $50 million for commercial civil space due to lower volume on the Orion program, partially offset by higher volume on other space exploration programs.
−Removed: This decrease was partially offset by higher net sales of $25 million for strategic and missile defense programs due to higher volume on reentry programs.
−Removed: Space’s operating profit during the quarter ended September 29, 2024 increased $13 million, or 5%, compared to the same period in 2023.
−Removed: The increase in operating profit was attributable to $25 million related to favorable contract mix across the portfolio, partially offset by $10 million of lower equity earnings driven by lower launch volume from our investment in United Launch Alliance (ULA).
−Removed: P rofit booking rate adjustments were comparable .
−Removed: Space’s net sales during the nine months ended September 29, 2024 increased $313 million , or 3%, compared to the same period in 2023.
−Removed: The increase was primarily attributable to higher net sales of $270 million for strategic and missile defense programs due to higher volume on the hypersonics and FBM programs;
−Removed: and higher net sales of $35 million for national security space programs due to higher volume on Transport Layer programs and ramp up on the Tracking Layer program, partially offset by lower volume on classified programs.
−Removed: These increases were partially offset by lower net sales of $70 million for commercial civil space due to lower volume and the impact of lower favorable profit adjustments on the Orion program, partially offset by higher volume on other space exploration programs.
−Removed: Space’s operating profit during the nine months ended September 29, 2024 increased $92 million, or 11%, compared to the same period in 2023.
−Removed: The increase was primarily attributable to $70 million related to favorable contract mix across the portfolio and $25 million from higher volume and program ramp up described above.
−Removed: Additionally, profit booking rate adjustments were $10 million lower due to lower net favorable profit adjustments on the Orion program.
−Removed: Total equity earnings (ULA) represented approximately $5 million, or 2%, and $30 million, or 3%, of Space's operating profit during the quarter and nine months ended September 29, 2024, compared to approximately $15 million, or 6%, and $20 million, or 2% for the same periods in 2023.
+Added: Space’s sales during the quarter ended March 30, 2025 decreased $64 million, or 2%, compared to the same period in 2024.
+Added: This decrease was primarily attributable to lower sales of $155 million on national security space programs due to program lifecycle on Next Generation Overhead Persistent Infrared (Next Gen OPIR) system and lower volume on Transport Layer programs.
+Added: This decrease was partially offset by an increase of $75 million primarily due to favorable performance at completion on certain commercial civil space programs.
+Added: Space’s ope rating profit during the quarter ended March 30, 2025 increased $54 million, or 17%, compared to the same period in 2024.
+Added: This increase was attributable to an $85 million increase in profit booking rate adjustments partially offset by $20 million of lower equity earnings driven by lower launch volume from our investment in United Launch Alliance (ULA).
+Added: The increase in profit booking rate adjustments was primarily due to favorable performance at completion on certain commercial civil space programs.
+Added: Total equity (losses)/earnings (ULA) represented approximately $(5) million, or (1)%, of Space's operating profit during the quarter ended March 30, 2025, compared to approximately $15 million, or 5% for the same period in 2024.
FINANCIAL CONDITION
Liquidity and Capital Resources
−Removed: At September 29, 2024, we had cash and cash equivalents of $3.2 billion that was generally available to fund ordinary business operations without significant legal, regulatory or other restrictions.
+Added: At March 30, 2025, we had cash and cash equivalents of $1.8 billion that was generally available to fund ordinary business operations without significant legal, regulatory or other restrictions.
Our principal source of liquidity is our cash from operations.
−Removed: However, we also have access to credit markets, if needed, for liquidity or general corporate purposes.
−Removed: This access includes our $3.0 billion revolving credit facility or the ability to issue commercial paper (see “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information).
−Removed: There were no borrowings outstanding under the revolving credit facility and commercial paper at both September 29, 2024 and December 31, 2023.
+Added: In addition, we have access to credit markets, if needed, for liquidity or general corporate purposes.
+Added: This access includes our $3.0 billion revolving credit facility or the ability to issue commercial paper.
+Added: There were no borrowings outstanding under the revolving credit facility or the commercial paper program at both March 30, 2025 and December 31, 2024.
Cash received from customers is our primary source of cash from operations.
1 unchanged sentence
If we incur costs in excess of funds obligated on the contract or in advance of a contract award, this negatively affects our cash flows, and we may be at risk for reimbursement of the excess costs.
+Added: Additionally, increases in costs due to tariffs may also impact our cash flows, as we may not be able to fully recover these costs, and even if recovery is possible, it may not occur in the same period as the incurred costs.
+Added: See “Recent Developments in Trade and Regulatory Policies” included within the “Business Overview” discussion above.
Billing timetables and payment terms on our contracts vary based on a number of factors, including the contract type.
−Removed: We generally bill and collect cash more frequently under cost-reimbursable contracts, which represented approximately
−Removed: 41% of the sales we recorded during the nine months ended September 29, 2024, as we are authorized to bill as the costs are incurred.
+Added: We generally bill and collect cash more frequently under cost-reimbursable contracts, which represented approximately 40% of the sales we recorded during the quarter ended March 30, 2025, as we are authorized to bill as the costs are incurred.
A number of our fixed-price contracts may provide for performance-based payments, which allow us to bill and collect cash as we perform on the contract.
−Removed: The amount of performance-based payments and the related milestones are encompassed in the negotiation of each contract.
+Added: The amounts of performance-based payments and the related milestones are determined in the negotiation of each contract.
The timing of such payments may differ from the timing of the costs incurred related to our contract performance, thereby affecting our cash flows.
−Removed: We have a disciplined and dynamic cash deployment strategy to invest in our business and key technologies to provide our customers with enhanced capabilities, enhance stockholder value, and position ourselves to take advantage of new business opportunities when they arise.
+Added: Government has indicated that it would consider progress payments as the baseline for negotiating payment terms on fixed-price contracts, rather than performance-based payments.
+Added: In contrast to negotiated performance-based payment terms, progress payment provisions correspond to a percentage of the amount of costs incurred during the performance of the contract and are invoiced regularly as costs are incurred.
+Added: Our cash flows may be affected if the U.S.
+Added: Government changes its payment policies.
+Added: Government from time to time withholds payments on certain of our billings based on contract terms or regulatory provisions.
+Added: Ultimately, the impact of policy changes or withholding payments may delay the receipt of cash, but the cumulative amount of cash collected during the life of the contract should not vary.
+Added: We seek to maintain a disciplined and dynamic cash deployment strategy to invest in our business and key technologies to provide our customers with enhanced capabilities, enhance stockholder value, and position ourselves to take advantage of new business opportunities when they arise.
Consistent with that strategy, we have continued to invest in our business and technologies through capital expenditures, independent research and development, and selective business acquisitions and investments.
We continue to return cash to stockholders through dividends and share repurchases.
−Removed: In October 2024, the Board of Directors authorized a fourth quarter dividend payment of $3.30 per share, representing an increase of $0.15 per share over the prior quarterly dividend payment.
−Removed: The Board of Directors also authorized an increase of $3.0 billion to our share repurchase program in addition to the $7.3 billion remaining authorization under our program as of September 29, 2024.
+Added: The remaining authorization under our program was $8.6 billion as of March 30, 2025.
The stock repurchase program does not have an expiration date and may be amended or terminated by the Board of Directors at any time.
1 unchanged sentence
We continue to actively manage our debt levels, including maturities and interest rates.
−Removed: We actively seek to finance our business in a manner that preserves financial flexibility while minimizing borrowing costs to the extent practicable.
+Added: We seek to finance our business in a manner that preserves financial flexibility while minimizing borrowing costs to the extent practicable.
We review changes in financial market and economic conditions to manage the types, amounts and maturities of our indebtedness.
3 unchanged sentences
The required funding of our qualified defined benefit pension plans is determined in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), as amended, and CAS.
−Removed: We could be required to make pension contributions earlier and/or in excess than planned if our return on pension assets is less than our assumptions, which would reduce our free cash flow.
+Added: We could be required to make pension contributions earlier than and/or in excess of what was planned if our return on pension assets is less than our assumptions, which would reduce our free cash flow.
We may also make additional contributions at our discretion.
−Removed: There were no material changes during the quarter or nine months ended September 29, 2024 to our contractual commitments as presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 Form 10-K that were outside the ordinary course of our business, except for, the $2.0 billion of senior unsecured notes issued on January 29, 2024.
−Removed: See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.
−Removed: We believe our cash and cash equivalents, our expected cash flow generated from operations and our access to credit markets will be sufficient to meet our cash requirements and cash deployment plans over the next twelve months and beyond based on our current business plans.
−Removed: On August 15, 2024, we entered into an agreement to acquire all of the outstanding shares of Terran Orbital Corporation (Terran).
−Removed: Under the terms of the agreement, we expect to pay approximately $300 million, net of cash acquired, to close the transaction.
−Removed: The transaction is expected to close in the fourth quarter of 2024 and is subject to the satisfaction of customary closing conditions, including regulatory and Terran stockholder approvals.
The following table provides a summary of our cash flow information followed by a discussion of the key elements (in millions):
−Removed: Nine Months Ended
−Removed: September 29,
−Removed: 2024 September 24,
+Added: Quarters Ended
+Added: 2025 March 31,
Cash and cash equivalents at beginning of year $ 2,483 $ 1,442
6 unchanged sentences
Net cash (used for) investing activities (430) (372)
−Removed: Net cash used for financing activities (3,286) (3,560)
+Added: Net cash (used for) provided by financing activities (1,659) 85
Net change in cash and cash equivalents (680) 1,348
1 unchanged sentence
Operating Activities
−Removed: Net cash provided by operating activities during the nine months ended September 29, 2024 increased $394 million compared to the same period in 2023.
−Removed: The increase was primarily due to lower federal tax payments, partially offset by a decrease in working capital (defined as receivables, contract assets, and inventories less accounts payable and contract liabilities), which includes the cash impacts for the lack of additional contractual authorization and funding from the U.S.
−Removed: Government prior to the end of the third quarter of 2024 on the Lot 18-19 contract of the F-35 program.
+Added: Net cash provided by operating activities during the quarter ended March 30, 2025 decreased $226 million compared to the same period in 2024.
+Added: The decrease in cash from operations was primarily due to an increase in contract assets as a result of the timing of milestones, higher insurance costs, and timing of payments for employee related accruals.
+Added: These items were partially offset by a decrease in accounts receivable due to the timing of billings and collections and an increase in accounts payable due to timing of supplier payments.
Non-GAAP Financial Measure - Free Cash Flow
1 unchanged sentence
Our capital expenditures are comprised of equipment and facilities infrastructure and information technology (inclusive of costs for the development or purchase of internal-use software that are capitalized).
−Removed: We use free cash flow to evaluate our business performance and overall liquidity, as well as a performance goal in our annual and long-term incentive plans.
+Added: We use free cash flow to evaluate our business performance and overall liquidity, and is a performance goal in our annual and long-term incentive plans.
We believe free cash flow is a useful measure for investors because it represents the amount of cash generated from operations after reinvesting in the business and that may be available to return to stockholders and creditors (through dividends, stock repurchases and debt repayments) or available to fund acquisitions and other investments.
The entire amount of free cash flow is not necessarily available for discretionary expenditures, however, because it does not account for certain mandatory expenditures, such as the repayment of maturing debt and future pension contributions.
−Removed: While management believes that free cash flow as a non-GAAP financial measure may be useful in evaluating our financial performance, it should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies.
+Added: While management believes that free cash flow as a non-GAAP financial measure may be useful in evaluating our financial performance and liquidity, it should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies.
The following table reconciles net cash provided by operating activities to free cash flow (in millions):
−Removed: Nine Months Ended
−Removed: September 29,
−Removed: 2024 September 24,
+Added: Quarters Ended
+Added: 2025 March 31,
Cash from operations $ 1,409 $ 1,635
1 unchanged sentence
Free cash flow $ 955 $ 1,257
−Removed: Free cash flow increased $278 million compared to the same period in 2023 primarily due to the increase in cash provided by operating activities described above, partially offset by higher capital expenditures.
+Added: Free cash flow during the quarter ended March 30, 2025 decreased $302 million compared to the same period in 2024 primarily due to higher software expenditures, as well as the operating cash flow drivers above.
Investing Activities
−Removed: Net cash used for investing activities during the nine months ended September 29, 2024 decreased $37 million compared to the same period in 2023, primarily due to proceeds from the sale of our Commercial Engine Solutions (CES) business.
−Removed: Capital expenditures totaled $1.1 billion and $987 million during the nine months ended September 29, 2024 and September 24, 2023.
+Added: Net cash used for investing activities during the quarter ended March 30, 2025 increased $58 million compared to the same period in 2024.
+Added: Capital expenditures totaled $454 million and $378 million during the quarter ended March 30,
+Added: 2025 and March 31, 2024.
The majority of our capital expenditures are for equipment and facilities infrastructure that generally are incurred to support new and existing programs across all of our business segments.
1 unchanged sentence
Financing Activities
−Removed: Net cash used for financing activities during the nine months ended September 29, 2024 increased $274 million compared to the same period in 2023 .
−Removed: During the nine months ended September 29, 2024 and September 24, 2023, we paid dividends totaling $2.3 billion ($9.45 per share) and $2.3 billion ($9.00 per share).
−Removed: During the nine months ended September 29, 2024, we paid $2.7 billion to repurchase 5.7 million shares of our common stock.
+Added: Net cash used for financing activities during the quarter ended March 30, 2025 increased $1.7 billion compared to the same period in 2024.
+Added: During the quarters ended March 30, 2025 and March 31, 2024, we paid dividends totaling $796 million ($3.30 per share) and $780 million ($3.15 per share).
+Added: During the quarter ended March 30, 2025, we paid $750 million to repurchase 1.7 million shares of our common stock.
See “Note 9 - Stockholders’ Equity” included in our Notes to Consolidated Financial Statements for additional information.
−Removed: During the nine months ended September 24, 2023, we paid $3.0 billion to repurchase 6.7 million shares of our common stock.
−Removed: During the nine months ended September 29, 2024 and September 24, 2023, we received net proceeds of $2.0 billion from issuance of senior unsecured notes.
−Removed: See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.
−Removed: During the nine months ended September 29, 2024, we repaid $168 million of long-term notes with a fixed interest rate of 8.375% according to their scheduled maturities.
+Added: During the quarter ended March 31, 2024, we paid $1.0 billion to repurchase 2.3 million shares of our common stock.
+Added: During the quarter ended March 31, 2024, we received net proceeds of $2.0 billion from issuance of senior unsecured notes.
OTHER MATTERS
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Marine Corps, and U.S.
−Removed: We also have commitments from seven international partner countries and eleven Foreign Military Sales (FMS) customers.
−Removed: We continue to see strong international demand for the F-35, with the Czech Republic signing an LOA in January 2024 to procure 24 F-35s, Singapore announcing in February 2024 its intent to purchase eight additional F-35s, and Greece signing an LOA in July 2024 to procure 20 F-35s, becoming the 19th nation to join the F-35 program.
+Added: We also have commitments from seven international partner countries and 12 FMS customers.
+Added: We continue to see strong international demand for the F-35.
+Added: In February 2025, Singapore signed an LOA for eight F-35As, adding to their prior program of record of 12 F-35Bs.
We expect international interest to continue to expand in the coming years.
−Removed: From program inception through September 29, 2024, we have delivered 1,040 production F-35 aircraft, including 748 F-35A variants, 197 F-35B variants and 95 F-35C variants, and our backlog as of that date was 325 aircraft, demonstrating the F-35 program’s continued progress and longevity.
−Removed: We resumed F-35 deliveries in the third quarter of 2024, after delivering none in the first half of the year, and delivered 44 Technology Refresh 3 (“TR-3”) configured aircraft and four TR-2 configured aircraft in the quarter.
−Removed: We anticipate delivering between 90 and 110 F-35 aircraft in 2024, inclusive of the aircraft delivered in the third quarter.
−Removed: We continue to focus on advancing TR-3 and Block 4 capabilities to support our customers’ mission requirements.
+Added: During the first quarter of 2025, we delivered 47 aircraft.
+Added: Since the program inception through March 30, 2025, we delivered 1,149 production F-35 aircraft, including 831 F-35A variants, 213 F-35B variants and 105 F-35C variants, and our backlog as of that date was 361 aircraft, demonstrating the F-35 program’s continued progress and longevity.
+Added: In December 2024, Lockheed Martin and the Joint Program Office (JPO) reached an agreement for an undefinitized contract action for Lot 18 F-35 Air Vehicle Production Contract for 145 aircraft.
+Added: The scope includes aircraft for the U.S.
+Added: Air Force, Navy, and Marines and the International Partners and Foreign Military Sales (FMS) customers, in addition to the required infrastructure for the international Final Assembly and Checkout Facilities (FACOs) and other equipment.
+Added: Lot 19 was negotiated concurrently with Lot 18, and both Lots are expected to be fully awarded in 2025.
The F-35 program is significant and complex and we and our customers continually review aircraft performance, program and delivery schedule, cost and supply chain issues, and requirements as part of our internal program management efforts and the DoD, Congressional and international countries’ oversight and budgeting processes.
Areas of particular focus currently include Lockheed Martin’s and our suppliers’ performance, software maturation related to TR-3 capability and software development more generally, flight test execution, cost of life cycle operations, sustainment, inflation-related cost and supply chain-related cost and schedule pressures, and efforts to increase affordability.
−Removed: We remain in negotiations with the U.S.
−Removed: Government on the Lots 18-19 production contract.
−Removed: Although negotiations for this contract are in process, we have been performing work on Lots 18-19 production under initial customer authorization and funding to begin work pursuant to an advance acquisition contract received in the fourth quarter of 2023.
−Removed: We and our industry team continue work in an effort to meet our customer’s desired aircraft delivery dates for the Lots 18-19 aircraft.
−Removed: Our costs began to exceed the advance acquisition contract value and related funding late in the third quarter of 2024.
−Removed: Typically, we recognize revenue on the F-35 program as work is performed.
−Removed: However, we are unable to recognize revenue in excess of the advance acquisition contract value (refer to our revenue recognition policy in our 2023 Form 10-K), which prevented the recognition of revenue and profit on approximately $400 million of costs incurred on the program in the third quarter of 2024, with at least an additional $300 million of impacts across the supply chain.
−Removed: Additionally, we were prevented from invoicing and receiving cash of approximately $450 million through the third quarter of 2024.
−Removed: At the end of the third quarter of 2024, we also had approximately $2 billion in potential termination liability exposure to third parties related to Lots 18-19 (some of which would be recoverable in the unlikely event of a termination).
−Removed: Currently, we expect to receive contractual authorization and funding on the Lots 18-19 production contract with the U.S.
−Removed: Government and resume invoicing costs incurred and recover sales, profit, and cash in the fourth quarter of 2024.
−Removed: However, until a final agreement is reached, or the U.S.
−Removed: Government otherwise provides additional contractual authorization and funding, our results of operations, cash flows, and financial condition will continue to be negatively impacted, and the impacts could be material.
+Added: As previously disclosed, deliveries of F-35 aircraft were put on hold in the first half of 2024 due to delays in the Technology Refresh-3 (TR-3) capabilities.
+Added: Deliveries resumed in July 2024 after reaching agreement with JPO on a phased approach to inserting such capabilities into the aircraft including timing of the final delivery payments and related withhold liquidations.
+Added: We continue to make progress on delivering the full TR-3 capabilities while enhancing the air dominance of the F-35 through on-going Block 4 development.
Contingencies
1 unchanged sentence
Critical Accounting Policies
−Removed: There have been no significant changes to the critical accounting policies disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Form 10-K, except for an update related to a trademark impairment as a result of the impacts of the U.S.
−Removed: Army announcement to cancel the Future Attack Reconnaissance Aircraft (FARA) program at the conclusion of fiscal year 2024 in our Form 10-Q for the quarter ended June 30, 2024.
+Added: There have been no significant changes to the critical accounting policies disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2024 Form 10-K.
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.