Item 1. Financial Statements
ITEM 1. Financial Statements
Lockheed Martin Corporation
Consolidated Statements of Earnings
(unaudited; in millions, except per share data)
Quarters Ended Six Months Ended
June 28,
2026 June 29,
2025 June 28,
2026 June 29,
2025
Sales
Products $ 16,783 $ 15,149 $ 31,614 $ 30,085
Services 3,280 3,006 6,470 6,033
Total sales 20,063 18,155 38,084 36,118
Operating costs and expenses
Products ( 15,063 ) ( 14,469 ) ( 28,461 ) ( 27,753 )
Services ( 2,862 ) ( 3,130 ) ( 5,646 ) ( 5,770 )
Impairment and other charges — ( 66 ) — ( 66 )
Other unallocated, net 308 244 547 528
Total operating costs and expenses ( 17,617 ) ( 17,421 ) ( 33,560 ) ( 33,061 )
Gross profit 2,446 734 4,524 3,057
Other income, net 33 14 18 63
Operating profit 2,479 748 4,542 3,120
Interest expense ( 266 ) ( 274 ) ( 535 ) ( 542 )
Non-service FAS pension expense
( 80 ) ( 99 ) ( 160 ) ( 197 )
Other non-operating income, net 45 42 105 72
Earnings before income taxes 2,178 417 3,952 2,453
Income tax expense ( 342 ) ( 75 ) ( 628 ) ( 399 )
Net earnings $ 1,836 $ 342 $ 3,324 $ 2,054
Earnings per common share
Basic $ 7.98 $ 1.46 $ 14.45 $ 8.78
Diluted $ 7.94 $ 1.46 $ 14.38 $ 8.75
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Lockheed Martin Corporation
Consolidated Statements of Comprehensive Income
(unaudited; in millions)
Quarters Ended Six Months Ended
June 28,
2026 June 29,
2025 June 28,
2026 June 29,
2025
Net earnings $ 1,836 $ 342 $ 3,324 $ 2,054
Other comprehensive income, net of tax
Retirement benefits
Amortization of net actuarial losses and prior service costs, net of tax of $ 17 million and $ 33 million in 2026 and $ 18 million and $ 35 million in 2025
62 64 124 128
Other, net of tax of $ 4 million and $ 5 million in 2026 and $ 9 million and $ 15 million in 2025
( 34 ) 102 ( 50 ) 167
Other comprehensive income, net of tax 28 166 74 295
Comprehensive income $ 1,864 $ 508 $ 3,398 $ 2,349
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Lockheed Martin Corporation
Consolidated Balance Sheets
(in millions, except par value)
June 28,
2026 December 31,
2025
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 3,791 $ 4,121
Receivables, net 3,356 3,901
Contract assets 16,038 13,001
Inventories 4,411 3,524
Other current assets 805 815
Total current assets 28,401 25,362
Property, plant and equipment, net 11,390 11,292
Goodwill 11,298 11,314
Intangible assets, net 1,787 1,887
Deferred income taxes 2,414 2,975
Other noncurrent assets 7,160 7,010
Total assets $ 62,450 $ 59,840
Liabilities and equity
Current liabilities
Accounts payable $ 4,915 $ 3,630
Salaries, benefits and payroll taxes 3,003 3,184
Contract liabilities 12,151 11,440
Current maturities of long-term debt — 1,168
Other current liabilities 3,740 3,913
Total current liabilities 23,809 23,335
Long-term debt, net 20,538 20,532
Accrued pension liabilities 3,931 3,915
Other noncurrent liabilities 5,404 5,337
Total liabilities 53,682 53,119
Stockholders’ equity
Common stock, $ 1 par value per share
230 229
Additional paid-in capital 247 —
Retained earnings 15,759 14,034
Accumulated other comprehensive loss ( 7,468 ) ( 7,542 )
Total stockholders’ equity 8,768 6,721
Total liabilities and equity $ 62,450 $ 59,840
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Lockheed Martin Corporation
Consolidated Statements of Cash Flows
(unaudited; in millions)
Six Months Ended
June 28,
2026 June 29,
2025
Operating activities
Net earnings $ 3,324 $ 2,054
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization 798 796
Stock-based compensation 180 141
Deferred income taxes 538 ( 561 )
Impairment and other charges — 66
Reach-forward losses on select programs — 1,615
Qualified defined benefit pension plans 184 223
Changes in assets and liabilities
Receivables, net 545 ( 955 )
Contract assets ( 3,037 ) ( 2,178 )
Inventories ( 887 ) ( 461 )
Accounts payable 1,409 1,500
Contract liabilities 711 ( 360 )
Income taxes 43 251
Other, net ( 353 ) ( 521 )
Net cash provided by operating activities 3,455 1,610
Investing activities
Capital expenditures ( 829 ) ( 805 )
Other, net ( 61 ) ( 340 )
Net cash used for investing activities ( 890 ) ( 1,145 )
Financing activities
Repayments of long-term debt ( 1,168 ) ( 142 )
Proceeds from commercial paper, net — 1,449
Repurchases of common stock — ( 1,250 )
Dividends paid ( 1,612 ) ( 1,567 )
Other, net ( 115 ) ( 145 )
Net cash used for financing activities ( 2,895 ) ( 1,655 )
Net change in cash and cash equivalents ( 330 ) ( 1,190 )
Cash and cash equivalents at beginning of period 4,121 2,483
Cash and cash equivalents at end of period $ 3,791 $ 1,293
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Lockheed Martin Corporation
Consolidated Statements of Equity
For the Quarters Ended June 28, 2026 and June 29, 2025
(unaudited; in millions)
Common
Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Total
Equity
Balance at March 29, 2026 $ 230 $ 32 $ 14,723 $ ( 7,496 ) $ 7,489
Net earnings — — 1,836 — 1,836
Other comprehensive income, net of tax — — — 28 28
Dividends declared ($ 3.45 per share)
— — ( 800 ) — ( 800 )
Stock-based awards, ESOP activity and other — 215 — — 215
Balance at June 28, 2026 $ 230 $ 247 $ 15,759 $ ( 7,468 ) $ 8,768
Balance at March 30, 2025 $ 233 $ — $ 14,773 $ ( 8,323 ) $ 6,683
Net earnings — — 342 — 342
Other comprehensive income, net of tax — — — 166 166
Dividends declared ($ 3.30 per share)
— — ( 1,546 ) — ( 1,546 )
Repurchases of common stock ( 1 ) ( 189 ) ( 310 ) — ( 500 )
Stock-based awards, ESOP activity and other — 189 — — 189
Balance at June 29, 2025 $ 232 $ — $ 13,259 $ ( 8,157 ) $ 5,334
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Lockheed Martin Corporation
Consolidated Statements of Equity
For the Six Months Ended June 28, 2026 and June 29, 2025
(unaudited; in millions)
Common
Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Total
Equity
Balance at December 31, 2025 $ 229 $ — $ 14,034 $ ( 7,542 ) $ 6,721
Net earnings — — 3,324 — 3,324
Other comprehensive income, net of tax — — — 74 74
Dividends declared ($ 6.90 per share)
— — ( 1,599 ) — ( 1,599 )
Stock-based awards, ESOP activity and other
1 247 — — 248
Balance at June 28, 2026 $ 230 $ 247 $ 15,759 $ ( 7,468 ) $ 8,768
Balance at December 31, 2024 $ 234 $ — $ 14,551 $ ( 8,452 ) $ 6,333
Net earnings — — 2,054 — 2,054
Other comprehensive income, net of tax — — — 295 295
Dividends declared ($ 6.60 per share)
— — ( 2,324 ) — ( 2,324 )
Repurchases of common stock ( 3 ) ( 225 ) ( 1,022 ) — ( 1,250 )
Stock-based awards, ESOP activity and other
1 225 — — 226
Balance at June 29, 2025 $ 232 $ — $ 13,259 $ ( 8,157 ) $ 5,334
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited)
NOTE 1 - BASIS OF PRESENTATION
We prepared these consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission (SEC) Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.
In the opinion of management, these consolidated financial statements reflect all adjustments that are of a normal recurring nature necessary for a fair presentation of our results of operations, financial condition, and cash flows for the interim periods presented. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates. Estimates inherent in the preparation of our consolidated financial statements include, but are not limited to, accounting for sales, cost recognition and profit booking rates; retirement benefits; environmental liabilities and assets for the portion of environmental costs that are probable of future recovery; evaluation of goodwill, intangible assets, investments and other assets for impairment; income taxes, including deferred income taxes; fair value measurements; and contingencies. The consolidated financial statements include the accounts of subsidiaries we control and variable interest entities if we are the primary beneficiary. We eliminate intercompany balances and transactions in consolidation.
We close our books and records on the last Sunday of each interim calendar quarter, which was on June 28 for the second quarter of 2026 and June 29 for the second quarter of 2025, to align our financial closing with our business processes. The consolidated financial statements and tables of financial information included herein are labeled based on that convention. This practice only affects interim periods as our fiscal year ends on December 31.
The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the full year or future periods. Unless otherwise noted, we present all per share amounts cited in these consolidated financial statements on a “per diluted share” basis. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025 (2025 Form 10-K).
NOTE 2 - EARNINGS PER COMMON SHARE
The weighted average number of shares outstanding used to compute earnings per common share were as follows (in millions):
Quarters Ended Six Months Ended
June 28,
2026 June 29,
2025 June 28,
2026 June 29,
2025
Weighted average common shares outstanding for basic computations 230.2 233.5 230.1 234.0
Weighted average dilutive effect of equity awards
0.9 0.8 1.0 0.8
Weighted average common shares outstanding for diluted computations
231.1 234.3 231.1 234.8
We compute basic and diluted earnings per common share by dividing net earnings by the respective weighted average number of common shares outstanding for the periods presented. Our calculation of diluted earnings per common share also includes the dilutive effects for the assumed vesting of outstanding restricted stock units (RSUs) and performance stock units (PSUs) based on the treasury stock method. There were no significant anti-dilutive equity awards during the quarters and six months ended June 28, 2026 and June 29, 2025. Basic and diluted weighted average common shares outstanding decreased in 2026 compared to 2025 due to share repurchases in the second half of 2025, but none during the quarter and six months ended June 28, 2026.
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NOTE 3 - INFORMATION ON BUSINESS SEGMENTS
Our operations are organized into four business segments, which also comprise our reportable segments: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. We generally organize our business segments based on the nature of products and services offered.
Summary operating results for each of our business segments were as follows (in millions):
Quarters Ended Six Months Ended
June 28,
2026 June 29,
2025 June 28,
2026 June 29,
2025
Sales
Aeronautics $ 8,112 $ 7,420 $ 15,065 $ 14,477
Missiles and Fire Control 4,101 3,433 7,750 6,806
Rotary and Mission Systems 4,354 3,995 8,345 8,323
Space 3,496 3,307 6,924 6,512
Total sales $ 20,063 $ 18,155 $ 38,084 $ 36,118
Other segment items (a)
Aeronautics $ 7,352 $ 7,518 $ 13,686 $ 13,855
Missiles and Fire Control 3,507 2,954 6,656 5,862
Rotary and Mission Systems 3,917 4,167 7,485 7,974
Space 3,125 2,945 6,272 5,771
Total other segment items $ 17,901 $ 17,584 $ 34,099 $ 33,462
Operating profit (loss)
Aeronautics $ 760 $ ( 98 ) $ 1,379 $ 622
Missiles and Fire Control 594 479 1,094 944
Rotary and Mission Systems 437 ( 172 ) 860 349
Space 371 362 652 741
Total business segment operating profit $ 2,162 $ 571 $ 3,985 $ 2,656
Unallocated items
FAS/CAS pension operating adjustment $ 422 $ 379 $ 843 $ 758
Impairment and other charges
— ( 66 ) — ( 66 )
Intangible asset amortization expense ( 50 ) ( 63 ) ( 100 ) ( 127 )
Other, net
( 55 ) ( 73 ) ( 186 ) ( 101 )
Total unallocated items 317 177 557 464
Total consolidated operating profit $ 2,479 $ 748 $ 4,542 $ 3,120
Intersegment sales
Aeronautics $ 112 $ 97 $ 205 $ 186
Missiles and Fire Control 252 231 490 398
Rotary and Mission Systems 662 632 1,257 1,198
Space 79 84 160 167
Total intersegment sales $ 1,105 $ 1,044 $ 2,112 $ 1,949
(a) Other segment items include operating costs and expenses plus certain immaterial items, such as other income (primarily equity earnings).
Segment results exclude intersegment transactions as these activities are eliminated in consolidation and are not considered in assessing the performance of each segment. As described below, segment operating profit also excludes other transactions that are not part of management’s evaluation of segment operating performance, which are included in “Unallocated items” to reconcile total segment operating profit to consolidated amounts. Business segment operating profit includes our share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of our business segments. See “Note 10 - Other” for a discussion related to certain factors that may impact the comparability of sales and operating profit of our business segments.
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Unallocated Items
Business segment operating profit excludes the FAS/CAS pension operating adjustment discussed below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government Cost Accounting Standards (CAS) or Federal Acquisition Regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, significant severance charges, significant asset impairments, intangible asset amortization expense, and other miscellaneous corporate activities. Collectively these items are included in “Unallocated items” to reconcile total segment operating profit to consolidated operating profit.
FAS/CAS Pension Operating Adjustment
Our business segments’ results of operations include pension expense only as calculated under CAS, which we refer to as CAS pension cost. We recover CAS pension cost through the pricing of our products and services on U.S. Government contracts and, therefore, recognize CAS pension cost in each of our business segments’ sales and operating costs and expenses. Our consolidated financial statements must present pension expense calculated in accordance with Financial Accounting Standards (FAS) requirements under U.S. GAAP. The operating portion of the total FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension expense and total CAS pension cost. The non-service FAS pension expense components are included in non-service FAS pension expense in our consolidated statements of earnings. As a result, to the extent that CAS pension cost exceeds the service cost component of FAS pension expense, we have a favorable FAS/CAS pension operating adjustment.
The total FAS/CAS pension adjustments, including the service and non-service cost components of FAS pension expense for our qualified defined benefit pension plans, were as follows (in millions):
Quarters Ended Six Months Ended
June 28,
2026 June 29,
2025 June 28,
2026 June 29,
2025
Total FAS pension expense and CAS cost
FAS pension expense
$ ( 92 ) $ ( 112 ) $ ( 184 ) $ ( 223 )
Less: CAS pension cost 434 392 867 784
Total FAS/CAS pension adjustment $ 342 $ 280 $ 683 $ 561
Service and non-service cost reconciliation
FAS pension service cost $ ( 12 ) $ ( 13 ) $ ( 24 ) $ ( 26 )
Less: CAS pension cost 434 392 867 784
Total FAS/CAS pension operating adjustment 422 379 843 758
Non-service FAS pension expense
( 80 ) ( 99 ) ( 160 ) ( 197 )
Total FAS/CAS pension adjustment $ 342 $ 280 $ 683 $ 561
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Disaggregation of Sales
Sales by products and services, contract type, customer, and geographic region were as follows (in millions):
Quarter Ended June 28, 2026
Aeronautics MFC RMS Space Total
Sales
Products $ 6,608 $ 3,700 $ 3,516 $ 2,959 $ 16,783
Services 1,504 401 838 537 3,280
Total sales $ 8,112 $ 4,101 $ 4,354 $ 3,496 $ 20,063
Sales by contract type
Fixed-price $ 5,528 $ 3,058 $ 2,592 $ 893 $ 12,071
Cost-reimbursable 2,584 1,043 1,762 2,603 7,992
Total sales $ 8,112 $ 4,101 $ 4,354 $ 3,496 $ 20,063
Sales by customer
U.S. Government $ 4,745 $ 3,234 $ 2,739 $ 3,409 $ 14,127
International (a)
3,362 866 1,567 80 5,875
U.S. commercial and other 5 1 48 7 61
Total sales $ 8,112 $ 4,101 $ 4,354 $ 3,496 $ 20,063
Sales by geographic region
United States $ 4,750 $ 3,235 $ 2,787 $ 3,416 $ 14,188
Europe 1,729 503 539 31 2,802
Asia Pacific 1,143 204 587 49 1,983
Middle East 126 127 131 — 384
Other 364 32 310 — 706
Total sales $ 8,112 $ 4,101 $ 4,354 $ 3,496 $ 20,063
Six Months Ended June 28, 2026
Aeronautics MFC RMS Space Total
Sales
Products $ 12,113 $ 7,023 $ 6,688 $ 5,790 $ 31,614
Services 2,952 727 1,657 1,134 6,470
Total sales $ 15,065 $ 7,750 $ 8,345 $ 6,924 $ 38,084
Sales by contract type
Fixed-price $ 10,025 $ 5,719 $ 4,922 $ 1,815 $ 22,481
Cost-reimbursable 5,040 2,031 3,423 5,109 15,603
Total sales $ 15,065 $ 7,750 $ 8,345 $ 6,924 $ 38,084
Sales by customer
U.S. Government $ 8,878 $ 5,606 $ 5,207 $ 6,746 $ 26,437
International (a)
6,171 2,143 3,040 163 11,517
U.S. commercial and other 16 1 98 15 130
Total sales $ 15,065 $ 7,750 $ 8,345 $ 6,924 $ 38,084
Sales by geographic region
United States $ 8,894 $ 5,607 $ 5,305 $ 6,761 $ 26,567
Europe 3,166 1,090 1,110 61 5,427
Asia Pacific 2,050 480 1,029 93 3,652
Middle East 351 517 301 9 1,178
Other 604 56 600 — 1,260
Total sales $ 15,065 $ 7,750 $ 8,345 $ 6,924 $ 38,084
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Quarter Ended June 29, 2025
Aeronautics MFC RMS Space Total
Sales
Products $ 5,960 $ 3,065 $ 3,332 $ 2,792 $ 15,149
Services 1,460 368 663 515 3,006
Total sales $ 7,420 $ 3,433 $ 3,995 $ 3,307 $ 18,155
Sales by contract type
Fixed-price $ 4,912 $ 2,447 $ 2,295 $ 912 $ 10,566
Cost-reimbursable 2,508 986 1,700 2,395 7,589
Total sales $ 7,420 $ 3,433 $ 3,995 $ 3,307 $ 18,155
Sales by customer
U.S. Government $ 4,646 $ 2,440 $ 2,858 $ 3,227 $ 13,171
International (a)
2,766 990 1,085 75 4,916
U.S. commercial and other 8 3 52 5 68
Total sales $ 7,420 $ 3,433 $ 3,995 $ 3,307 $ 18,155
Sales by geographic region
United States $ 4,654 $ 2,443 $ 2,910 $ 3,232 $ 13,239
Europe 1,404 381 279 22 2,086
Asia Pacific 984 223 601 49 1,857
Middle East 159 375 219 4 757
Other 219 11 ( 14 ) — 216
Total sales $ 7,420 $ 3,433 $ 3,995 $ 3,307 $ 18,155
Six Months Ended June 29, 2025
Aeronautics MFC RMS Space Total
Sales
Products $ 11,706 $ 6,082 $ 6,828 $ 5,469 $ 30,085
Services 2,771 724 1,495 1,043 6,033
Total sales $ 14,477 $ 6,806 $ 8,323 $ 6,512 $ 36,118
Sales by contract type
Fixed-price $ 9,625 $ 4,887 $ 4,955 $ 1,854 $ 21,321
Cost-reimbursable 4,852 1,919 3,368 4,658 14,797
Total sales $ 14,477 $ 6,806 $ 8,323 $ 6,512 $ 36,118
Sales by customer
U.S. Government $ 9,288 $ 4,831 $ 5,645 $ 6,356 $ 26,120
International (a)
5,171 1,968 2,553 146 9,838
U.S. commercial and other 18 7 125 10 160
Total sales $ 14,477 $ 6,806 $ 8,323 $ 6,512 $ 36,118
Sales by geographic region
United States $ 9,306 $ 4,838 $ 5,770 $ 6,366 $ 26,280
Europe 2,651 776 583 44 4,054
Asia Pacific 1,824 447 1,234 96 3,601
Middle East 307 717 431 6 1,461
Other 389 28 305 — 722
Total sales $ 14,477 $ 6,806 $ 8,323 $ 6,512 $ 36,118
(a) International sales include foreign military sales (FMS) contracted through the U.S. Government and direct commercial sales to international governments and other international customers.
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Our Aeronautics business segment includes our largest program, the F-35 Lightning II, an international multi-role, multi-variant, stealth fighter aircraft. Sales for the F-35 program represented approximately 28 % and 27 % of our total consolidated sales for the quarters and six months ended both June 28, 2026 and June 29, 2025.
Assets
Total assets for each of our business segments were as follows (in millions):
June 28,
2026 December 31,
2025
Assets
Aeronautics $ 15,840 $ 14,673
MFC 8,164 6,304
RMS 16,602 16,576
Space 7,998 7,755
Total business segment assets 48,604 45,308
Corporate assets (a)
13,846 14,532
Total assets $ 62,450 $ 59,840
(a) Corporate assets primarily include cash and cash equivalents, deferred income taxes, assets held in a trust for deferred compensation plans, capitalized software, assets for the portion of environmental costs that are probable of future recovery, property, plant and equipment used in our corporate operations, and other marketable investments.
NOTE 4 - CONTRACT ASSETS AND LIABILITIES
Contract assets and contract liabilities were as follows (in millions):
June 28,
2026 December 31,
2025
Contract assets $ 16,038 $ 13,001
Contract liabilities 12,151 11,440
Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. These assets are primarily driven by the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations for which we have not yet billed our customers. During the six months ended June 28, 2026, contract assets increased $ 3.0 billion primarily due to the F-35 program at Aeronautics and tactical and strike missiles at MFC. There were no significant credit or impairment losses related to our contract assets during the quarters and six months ended June 28, 2026 and June 29, 2025.
Contract liabilities include advance payments and billings in excess of revenue recognized. These liabilities increased $ 711 million during the six months ended June 28, 2026, primarily due to payment received in excess of revenue recognized on performance obligations (primarily for the F-16 program at Aeronautics). During the quarter and six months ended June 28, 2026, we recognized $ 1.8 billion and $ 4.8 billion of our contract liabilities at December 31, 2025 as revenue. During the quarter and six months ended June 29, 2025, we recognized $ 1.3 billion and $ 4.5 billion of our contract liabilities at December 31, 2024 as revenue.
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NOTE 5 - INVENTORIES
Inventories consisted of the following (in millions):
June 28,
2026 December 31,
2025
Materials, spares and supplies $ 675 $ 659
Work-in-process 3,528 2,667
Finished goods 208 198
Total inventories $ 4,411 $ 3,524
Costs incurred to fulfill a contract in advance of the contract being awarded are included in inventories as work-in-process if we determine that those costs relate directly to a contract or to an anticipated contract that we can specifically identify and determine that the contract award is probable, the costs generate or enhance resources that will be used in satisfying performance obligations, and the costs are recoverable (referred to as pre-contract costs). These advance procurement costs are generally incurred in order to enhance our ability to achieve schedule and certain customer milestones. Pre-contract costs that are initially capitalized in inventory generally are eventually recognized as operating costs consistent with the transfer of products and services to the customer upon the receipt of the anticipated contract. All other pre-contract costs, including start-up costs, are expensed as incurred. As of June 28, 2026 and December 31, 2025, $ 1.9 billion and $ 1.5 billion of pre-contract costs (primarily the classified contracts, F-35 program and F-16 program at Aeronautics and Sikorsky programs at RMS) were included in work-in-process inventories.
NOTE 6 - RETIREMENT BENEFITS
Pretax FAS pension expense related to our qualified defined benefit pension plans consisted of the following (in millions):
Quarters Ended Six Months Ended
June 28,
2026 June 29,
2025 June 28,
2026 June 29,
2025
Qualified defined benefit pension plans
Operating:
Service cost $ ( 12 ) $ ( 13 ) $ ( 24 ) $ ( 26 )
Non-operating:
Interest cost ( 347 ) ( 368 ) ( 694 ) ( 736 )
Expected return on plan assets 354 360 708 720
Amortization of actuarial losses ( 79 ) ( 79 ) ( 159 ) ( 157 )
Amortization of prior service costs ( 8 ) ( 12 ) ( 15 ) ( 24 )
Non-service FAS pension expense
( 80 ) ( 99 ) ( 160 ) ( 197 )
Total FAS pension expense
$ ( 92 ) $ ( 112 ) $ ( 184 ) $ ( 223 )
We record the service cost component of FAS pension expense for our qualified defined benefit pension plans in consolidated operating profit and the non-service components in non-service FAS pension expense on our consolidated statements of earnings.
Total FAS income for our other retirement benefit plans was not material during the quarters and six months ended June 28, 2026 and June 29, 2025 and is part of other non-operating income, net on our consolidated statements of earnings.
The required funding of our qualified defined benefit pension plans is determined in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), as amended, along with consideration of CAS and Internal Revenue Code rules. We made no contributions to our qualified defined benefit pension plans during the quarters and six months ended June 28, 2026 and June 29, 2025.
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NOTE 7 - LEGAL PROCEEDINGS AND CONTINGENCIES
Although we cannot predict the outcome of legal or other proceedings with certainty, where there is at least a reasonable possibility that a loss may be incurred, GAAP requires us to disclose an estimate of the reasonably possible loss or range of loss or make a statement that such an estimate cannot be made. We follow a thorough process in which we seek to estimate the reasonably possible loss or range of loss, and only if we are unable to make such an estimate do we conclude and disclose that an estimate cannot be made. Accordingly, unless otherwise indicated below in our discussion of legal proceedings or environmental matters, a reasonably possible loss or range of loss associated with any individual proceeding or matter cannot be estimated.
Legal Proceedings
We are a party to litigation and other proceedings that arise in the ordinary course of our business, including matters arising under federal, state, local and foreign requirements relating to the protection of the environment, and are subject to contingencies related to certain businesses we previously owned. These types of matters could result in fines, penalties, cost reimbursements or contributions, compensatory or treble damages or non-monetary sanctions or relief. We do not believe that these matters, including the legal proceedings described below, will have a material adverse effect on the company as a whole, notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings and cash flows in the period in which it is recognized.
Securities-Related Actions
On July 28, 2025, a putative class action was filed—and subsequently amended on January 12, 2026—in United States District Court for the Southern District of New York against us and certain current and former members of our senior management. The shareholder plaintiffs assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (Exchange Act), on behalf of persons and entities that purchased or otherwise acquired our securities between January 23, 2024 and July 21, 2025. Plaintiffs seek unspecified losses allegedly caused by alleged misstatements about certain classified programs in the Aeronautics and MFC business segments and F-35 program, which were allegedly revealed to be false when we announced estimated losses relating to certain of those programs.
Separately, based on allegations substantially similar to the above-described securities class action, shareholder derivative complaints were filed in the United States District Court for the District of Maryland on September 11, 2025 and May 18, 2026, against current and former members of our Board of Directors and senior management. We are named as a nominal defendant. Together, the derivative complaints assert claims under Sections 14(a), 20(a), and 10(b) of the Exchange Act, as well as claims for breach of fiduciary duty, abuse of control, gross mismanagement, corporate waste, unjust enrichment, and contribution. Based on the information available to date, we do not believe that these matters will have a material adverse effect on our results of operations, financial condition, or liquidity.
Lockheed Martin v. Metropolitan Transportation Authority
On April 24, 2009, we filed a declaratory judgment action against the New York Metropolitan Transportation Authority and its Capital Construction Company (collectively, the MTA) asking the U.S. District Court for the Southern District of New York to find that the MTA is in material breach of our agreement based on the MTA’s failure to provide access to sites where work must be performed and the customer-furnished equipment necessary to complete the contract. The MTA filed an answer and counterclaim alleging that we breached the contract and subsequently terminated the contract for alleged default. The primary damages sought by the MTA are the costs to complete the contract and potential re-procurement costs. While we are unable to estimate the cost of another contractor to complete the contract and the costs of re-procurement, we note that our contract with the MTA had a total value of $ 323 million, of which $ 241 million was paid to us, and that the MTA is seeking damages of approximately $ 190 million. We dispute the MTA’s allegations and are defending against them. Additionally, following an investigation, our sureties on a performance bond related to this matter, who were represented by independent counsel, concluded that the MTA’s termination of the contract was improper. Finally, our declaratory judgment action was later amended to include claims for monetary damages against the MTA of approximately $ 95 million. This matter was taken under submission by the District Court in December 2014, after a five-week bench trial and the filing of post-trial pleadings by the parties. We continue to await a decision from the District Court. Although this matter relates to our former Information Systems & Global Solutions business (IS&GS), we retained responsibility for the litigation when we divested IS&GS in 2016.
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Environmental Matters
We are involved in proceedings and potential proceedings relating to soil, sediment, surface water, and groundwater contamination, disposal of hazardous substances, and other environmental matters at several of our current or former facilities, other facilities for which we may have contractual responsibility, and at third-party sites where we have been designated as a potentially responsible party (PRP). These proceedings could result in fines, penalties, cost reimbursements or contributions, compensatory or treble damages or non-monetary sanctions or relief.
At June 28, 2026 and December 31, 2025, the aggregate amount of liabilities recorded for environmental remediation matters was $ 652 million and $ 659 million, most of which are recorded in other noncurrent liabilities on our consolidated balance sheets. We have recorded assets for the portion of environmental costs that are probable of future recovery totaling $ 600 million and $ 605 million at June 28, 2026 and December 31, 2025, most of which are recorded in other noncurrent assets on our consolidated balance sheets.
We continue to pursue claims against other PRPs, including the U.S. Government, for recovery of costs incurred or for contribution to site remediation costs, and are conducting remediation activities under various consent decrees, orders, and agreements relating to soil, groundwater, sediment, or surface water contamination at certain sites of former or current operations. Under certain of these agreements, the U.S. Government and/or private parties reimburse us an amount equal to a percentage, specific to each site, of expenditures for certain remediation activities in their capacity as PRPs under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).
The timing and extent of remediation costs remain uncertain. New site-specific information or changes in federal or state regulation could increase current liability and recoverable asset estimates. We perform quarterly reviews of these liabilities and receivables, projecting costs and recoveries over a period of approximately 20 years.
Letters of Credit and Surety Bonds
We have entered into standby letters of credit and surety bonds issued on our behalf by financial institutions, and we have directly issued guarantees to third parties primarily relating to advances received from customers and the guarantee of future performance on certain contracts. Letters of credit and surety bonds generally are available for draw down in the event we do not perform. We had total outstanding letters of credit and surety bonds aggregating $ 3.3 billion and $ 3.5 billion at June 28, 2026 and December 31, 2025.
Other Contingencies
As a U.S. Government contractor, we are subject to various audits and investigations by the U.S. Government to determine whether our operations are being conducted in accordance with applicable regulatory requirements. U.S. Government investigations of us, whether relating to U.S. Government contracts or conducted for other reasons, could result in civil or criminal penalties and administrative sanctions, including reductions of the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, repayments, fines or penalties being imposed upon us, suspension, proposed debarment, debarment from eligibility for future U.S. Government contracting, or suspension of export privileges. Reductions of the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, repayments, fines and penalties could have a material impact on financial condition and results of operations in any particular reporting period, and suspension or debarment could have a material adverse effect on us because of our dependence on contracts with the U.S. Government. U.S. Government investigations often take years to complete and many result in no adverse action against us. We also provide products and services to customers outside of the United States, which are subject to U.S. and foreign laws and regulations and foreign procurement policies and practices. Our compliance with local regulations or applicable U.S. Government regulations also may be audited or investigated.
Additionally, in the normal course of business, we provide warranties to our customers associated with certain product sales. We record estimated warranty costs in the period in which the related products are delivered. The warranty liability is generally based on the number of months of warranty coverage remaining for the products delivered and the average historical monthly warranty payments. Warranty obligations incurred in connection with long-term production contracts are accounted for within the contract estimates at completion.
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NOTE 8 - FAIR VALUE MEASUREMENTS
Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following (in millions):
June 28, 2026 December 31, 2025
Total Level 1 Level 2 Total Level 1 Level 2
Assets
Mutual funds $ 1,153 $ 1,153 $ — $ 1,131 $ 1,131 $ —
U.S. Government securities 50 — 50 80 — 80
Other securities 797 435 362 711 372 339
Derivatives 14 — 14 47 — 47
Liabilities
Derivatives 131 — 131 113 — 113
Substantially all assets measured at fair value, other than derivatives, represent assets held in a trust to fund certain of our non-qualified deferred compensation plans and are recorded in other noncurrent assets on our consolidated balance sheets. The fair values of mutual funds and certain other securities are determined by reference to the quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction costs. The fair values of U.S. Government and certain other securities are determined using pricing models that use observable inputs (e.g., interest rates and yield curves observable at commonly quoted intervals), bids provided by brokers or dealers or quoted prices of securities with similar characteristics. The fair values of derivative instruments, which consist of foreign currency forward contracts, including embedded derivatives, and interest rate swap contracts, are primarily determined based on the present value of future cash flows using model-derived valuations that use observable inputs such as interest rates, credit spreads and foreign currency exchange rates.
We use derivative instruments principally to reduce our exposure to market risks from changes in foreign currency exchange rates and interest rates. We transact business globally and are subject to risks associated with changing foreign currency exchange rates. We do not enter into or hold derivative instruments for speculative trading purposes. These contracts hedge forecasted foreign currency transactions in order to minimize fluctuations in our earnings and cash flows associated with changes in foreign currency exchange rates. We designate foreign currency hedges as cash flow hedges. We enter into foreign currency hedges such as forward and option contracts that change in value as foreign currency exchange rates change. Our most significant foreign currency exposures relate to the British pound sterling, the euro, the Canadian dollar, the Australian dollar, the Norwegian kroner and the Polish zloty. We also are exposed to the impact of interest rate changes primarily through our borrowing activities. For fixed rate borrowings, we may use variable interest rate swaps, effectively converting fixed rate borrowings to variable rate borrowings in order to hedge changes in the fair value of the debt. These swaps are designated as fair value hedges. For variable rate borrowings, we may use fixed interest rate swaps, effectively converting variable rate borrowings to fixed rate borrowings in order to minimize the impact of interest rate changes on earnings. These swaps are designated as cash flow hedges. We also may enter into derivative instruments that are not designated as hedges and do not qualify for hedge accounting, which are intended to minimize certain economic exposures.
The aggregate notional amount of our outstanding interest rate swaps was $ 1.3 billion at both June 28, 2026 and December 31, 2025. The aggregate notional amount of our outstanding foreign currency hedges was $ 7.0 billion and $ 7.2 billion at June 28, 2026 and December 31, 2025. The fair values of our outstanding interest rate swaps and foreign currency hedges at June 28, 2026 and December 31, 2025 were not significant. Derivative instruments did not have a material impact on net earnings and comprehensive income during the quarters and six months ended June 28, 2026 and June 29, 2025. The impact of derivative instruments on our consolidated statements of cash flows is included in net cash provided by operating activities. Substantially all of our derivatives are designated for hedge accounting.
In addition to the financial instruments listed in the table above, we hold other financial instruments, including cash and cash equivalents, receivables, accounts payable and debt. The carrying amounts for cash and cash equivalents, receivables and accounts payable approximated their fair values. The estimated fair value of our outstanding debt was $ 20.5 billion and $ 22.0 billion at June 28, 2026 and December 31, 2025. The outstanding principal amount of debt, including short-term and long-term debt, was $ 21.7 billion and $ 22.9 billion at June 28, 2026 and December 31, 2025, excluding $ 1.2 billion of unamortized discounts and issuance costs at both June 28, 2026 and December 31, 2025. The
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estimated fair values of our outstanding debt were determined based on the present value of future cash flows using model-derived valuations that use observable inputs such as interest rates and credit spreads (Level 2).
Also in addition to the financial instruments listed in the table above, we make investments in companies that we believe are advancing or developing new technologies applicable to our business. These investments are primarily in early-stage companies and may be in the form of common or preferred stock, warrants, convertible debt securities, investments in funds or other investments. Most of these investments are in securities without readily determinable fair values (privately held securities), which are measured initially at cost and are then adjusted to fair value only if there is an observable price change or reduced for impairment, if applicable. The carrying amounts of the investments were $ 784 million and $ 669 million at June 28, 2026 and December 31, 2025. Net gains recorded due to adjustments in valuation and/or sales of investments were not material for the quarters and six months ended June 28, 2026 and June 29, 2025.
NOTE 9 - STOCKHOLDERS’ EQUITY
Dividends
We paid cash dividends of $ 1.6 billion ($ 6.90 per share) during the six months ended June 28, 2026. The total amount of dividends declared may differ from the total amount of dividends paid during a period due to the timing of dividend-equivalents paid on RSUs and PSUs. These dividend-equivalents are accrued during the vesting period and are paid upon the vesting of the RSUs and PSUs, which primarily occurs in the first quarter each year.
Accumulated Other Comprehensive Loss (AOCL)
Changes in the balance of AOCL, net of tax, consisted of the following (in millions):
Retirement
Benefits Other, net AOCL
Balance at December 31, 2025 $ ( 7,555 ) $ 13 $ ( 7,542 )
Other comprehensive loss before reclassifications — ( 55 ) ( 55 )
Amounts reclassified from AOCL
Amortization of net actuarial losses and prior service costs (a)
124 — 124
Other — 5 5
Total reclassified from AOCL 124 5 129
Total other comprehensive income 124 ( 50 ) 74
Balance at June 28, 2026 $ ( 7,431 ) $ ( 37 ) $ ( 7,468 )
Balance at December 31, 2024 $ ( 8,288 ) $ ( 164 ) $ ( 8,452 )
Other comprehensive income before reclassifications — 142 142
Amounts reclassified from AOCL
Amortization of net actuarial losses and prior service costs (a)
128 — 128
Other — 25 25
Total reclassified from AOCL 128 25 153
Total other comprehensive income 128 167 295
Balance at June 29, 2025 $ ( 8,160 ) $ 3 $ ( 8,157 )
(a) Reclassifications from AOCL related to retirement benefits were recorded as a component of FAS expense for each period presented. These amounts include $ 62 million and $ 64 million, net of tax, for the quarters ended June 28, 2026 and June 29, 2025, which are comprised of the amortization of net actuarial losses of $ 56 million and $ 55 million, and the amortization of net prior service costs of $ 6 million and $ 9 million, for the quarters ended June 28, 2026 and June 29, 2025. See “Note 6 - Retirement Benefits”.
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NOTE 10 - OTHER
Contract Estimates
We generate sales from long-term contracts for the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. We recognize revenue as performance obligations are satisfied and the customer obtains control of the products and services. For performance obligations to deliver products with continuous transfer of control to the customer, revenue is recognized based on the extent of progress towards completion of the performance obligation, generally using the percentage-of-completion cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer as we incur costs on our contracts. For performance obligations in which control does not continuously transfer to the customer, we recognize revenue at the point in time in which each performance obligation is fully satisfied.
Significant judgments and assumptions are made in estimating contract sales, costs, and profit. We estimate profit as the difference between total estimated sales and total estimated costs to complete the contract and recognize profit as costs are incurred (over time sales recognition) or when the customer accepts the product or service (point in time sales recognition). Contract sales may include estimates of variable consideration, including cost or performance incentives (such as award and incentive fees), unpriced change orders, requests for equitable adjustment (REAs), and contract claims. Variable consideration is included in total estimated sales to the extent it is probable that a significant reversal in the amount of cumulative sales recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We also estimate variable consideration as the most likely amount to which we expect to be entitled. Contract costs include significant estimates related to labor, subcontractors, materials, overhead, general and administrative expenses, and costs to fulfill our industrial cooperation agreements, sometimes referred to as offset or localization agreements, required under certain contracts with international customers. Significant estimates related to costs include, but are not limited to, the complexity and scope of the work to be performed, labor productivity and availability, labor rates including terms of collective bargaining arrangements, execution by our subcontractors, the availability and cost of materials including any impact from changing costs or inflation, the length of time to complete the performance obligation, overhead and general and administrative cost rates, and estimated useful lives of components and assets, among others. In particular, fixed-price development programs involve significant management judgment, as development contracts by nature have elements that have not been done before and thus, are highly subject to future unexpected changes in estimates as described below.
At the outset of a long-term contract, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract, as well as our ability to earn variable consideration, and assess the effects of those risks on our estimates of sales and total costs to complete the contract. The estimates consider the technical requirements (e.g., a newly developed product versus a mature product), the schedule and associated tasks (e.g., the number and type of milestone events) and costs (e.g., labor, subcontractors, materials, overhead, general and administrative expenses, and offset or localization agreements). The initial profit booking rate of each contract considers risks surrounding the ability to achieve the technical requirements, schedule and costs in the initial estimated total costs to complete the contract. We review our estimates related to sales, cost, and profit for each contract at least annually or when a change in circumstances warrants a modification to a previous estimate. For significant contracts, we review our estimates more frequently. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities, and the related changes in estimates of revenues and costs. Profit booking rates may increase during the performance of the contract if we successfully retire risks related to earning variable consideration and/or the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract or may increase the variable consideration we expect to receive on the contract, which we refer to as favorable profit booking rate adjustments. Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase or our estimates of variable consideration we expect to receive decrease, which we refer to as unfavorable profit booking rate adjustments.
We recognize changes in estimated contract sales or costs and the resulting changes in contract profit on a cumulative basis. Cumulative profit booking rate adjustments represent the cumulative effect of the changes on current and prior periods; sales and operating margins in future periods are recognized as if the revised estimates had been used since contract inception. Profit booking rate adjustments can have a significant effect on our financial statements and affect the comparability of our segment sales, operating profit and operating margin. Segment operating profit and margin can also be impacted favorably or unfavorably by, for example, certain items such as the positive resolution of contractual
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matters, cost recoveries on severance and restructuring, insurance recoveries and gains on sales of assets, as well as unfavorable items including the adverse resolution of contractual matters, supply chain disruptions, restructuring charges (except for significant severance actions, which are excluded from segment operating results), reserves for disputes, certain asset impairments, and losses on sales of certain assets. When estimates of total costs to be incurred on a contract exceed total estimates of the transaction price, a provision for the entire loss is determined at the contract level and is recorded in the period in which the loss is evident, which we refer to as a reach-forward loss.
The following table presents the effect of profit booking rate adjustments on our financial results (in millions, except per share data):
Quarters Ended Six Months Ended
June 28,
2026 June 29,
2025 June 28,
2026 June 29,
2025
Sales $ 408 $ ( 361 ) $ 624 $ 142
Segment operating profit (loss) 375 ( 1,045 ) 590 ( 565 )
% of segment operating profit (loss) 17 % ( 183 ) % 15 % ( 21 ) %
Net earnings (loss) 296 ( 826 ) 466 ( 446 )
Diluted earnings (loss) per share 1.28 ( 3.53 ) 2.02 ( 1.90 )
During the six months ended June 28, 2026, we recorded unfavorable profit adjustments of $ 125 million on the F-16 program at Aeronautics as a result of production performance and development delays, $ 95 million on the C-130 program at Aeronautics as a result of continued diminishing manufacturing source integration challenges and associated delivery delays, $ 95 million on Heavy Lift programs at RMS as a result of production performance, and $ 80 million on Seahawk programs at RMS as a result of production performance and schedule delays. During the quarter ended June 29, 2025, we recorded losses of $ 950 million on an ongoing classified program at Aeronautics, and $ 570 million on Canadian Maritime Helicopter Program (CMHP) and $ 95 million on Türkish Utility Helicopter Program (TUHP) at RMS. During the six months ended June 29, 2025, in addition to the losses above, we recorded $ 125 million of adjustments resulting from favorable performance upon completion on certain commercial civil space programs at Space and an $ 80 million favorable adjustment upon completion of a classified program at Aeronautics.
We have various development programs for new and upgraded products, services, and related technologies which have complex design and technical challenges. This development work is inherently uncertain and subject to significant variability in estimates of the cost and time required to complete the work by us and our suppliers. Many of these programs have cost-type contracting arrangements (e.g. cost-reimbursable or cost-plus-fee). In such cases, the associated financial risks are primarily in reduced fees, lower profit rates, or program cancellation if cost, schedule, or technical performance issues arise. However, some of our existing development programs are contracted on a fixed-price basis or include cost-type contracting for the development phase with fixed-price production options. Our customers continue to implement procurement strategies such as these that shift risk to contractors. Competitively bid programs with fixed-price development work or fixed-price production options increase the risk of a reach-forward loss upon contract award and during the period of contract performance. Due to the complex and often experimental nature of development programs, we may experience (and have experienced in the past) technical and quality issues during the development of new products or technologies for a variety of reasons. Our development programs are ongoing, and while we believe the cost and fee estimates incorporated in the financial statements are appropriate, the technical complexity of these programs and fixed-price contract structure creates financial risk as estimated completion costs may exceed the current contract value, which could trigger earnings charges, termination provisions, or other financially significant exposures. These programs have risk for reach-forward losses if our estimated costs exceed our estimated contract revenues, and such losses could be significant to our financial results in any period that they are recognized. Any such losses are recognized in the period in which the loss is evident.
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Aeronautics Classified Program
We have experienced significant performance issues on an existing classified program at our Aeronautics business segment. The initial phase is on a fixed-price incentive fee contract with fixed-price incentive fee options for additional phases. Phases within the program involve highly complex design and systems integration. As a result of performance issues with the program, Aeronautics completed a comprehensive review of its design, integration, test, and other processes to achieve the technical requirements of the program in the second quarter of 2025. The performance issues that occurred in 2025, and the comprehensive review completed in the second quarter of 2025, resulted in significant changes in the program’s processes and testing approach and led to an extension of the program’s schedule, which drove a substantial increase in cost estimates. As a result, during the second quarter of 2025, we recognized additional reach-forward losses of $ 950 million across both phases of the program. The primary drivers of the additional reach-forward losses recognized in the second quarter of 2025 included: (1) software development performance degradation and integration findings observed over a continued period; (2) learnings in recent software and build experience on another program specifically relevant to the program; (3) significant changes in test plan resulting from customer discussions and changes in test execution strategy; (4) safety-critical and other necessary design and engineering changes in response to certain observed performance degradation and a discrete event; and (5) complete schedule realignment, including as a result of items (1) through (4).
As of June 28, 2026, cumulative losses recognized to date on this program remained at approximately $ 1.8 billion across both phases. As of June 28, 2026, $ 427 million of the losses remained accrued in other current liabilities on our consolidated balance sheets. We continue to proactively manage the technical requirements and our performance, the remaining work and any future changes in scope or schedule, and estimated costs to complete the program, including future phases. Due to the nature of the highly complex design and systems integration on this program, we may need to record additional losses in future periods if performance issues, increases in scope, or increases in cost from prior estimates indicate that further losses are evident. Our estimates may change, in particular, as we conduct further development and testing on the program, which may lead to new findings or cause us to modify our expectations or understandings of the risks inherent in the program. Any such losses could be material to our financial results in any period that they are recognized. We and our industry team will continue to incur advanced procurement costs (also referred to as pre-contract costs) to enhance our ability to achieve the schedule and certain milestones which could be significant. We will monitor the recoverability of pre-contract costs, which could be impacted by our assessment of the customer’s decision regarding the funding of future phases of the program.
MFC Classified Program
Our MFC business segment has been performing under a competitively bid classified contract, which includes a cost-reimbursable base contract for the initial phase of the program and multiple fixed-price options for additional phases. We previously disclosed that the options may be exercised over the next several years and, if performed, we expect they would each be at a loss. Certain options have been exercised, and based upon performance to date, future requirements of the program, discussions with the customer, and anticipated customer funding, among other factors, we continue
to believe it is probable that the remaining unexercised options will be exercised. As we perform on the cost-reimbursable base contract and the options, we continue to evaluate our estimates of cost necessary to complete the scope on the contract. Our estimates could change based on our performance, supplier negotiations and their performance, macroeconomic impacts, and discoveries made in the execution of these options or on the cost-reimbursable base contract. As of June 28, 2026, cumulative losses recognized on the program remained at approximately $ 1.5 billion in total, of which, $ 1.1 billion remained accrued in other current liabilities on our consolidated balance sheets. Any changes to our estimates or assumptions may result in additional losses and such losses could be material to our financial results in any period that they are recognized.
Canadian Maritime Helicopter Program
Our RMS business segment has been performing the Canadian Maritime Helicopter Program (CMHP) under multiple contracts with the Canadian government. The program provides for design, development, and production of CH-148 aircraft (the Original Equipment contract), which is a military variant of the S-92 helicopter, and for logistical support to the fleet (the In Service Support contract) over an extended time period. In 2025, the final aircraft under the program was delivered to Canada and accepted. The program has experienced performance issues and we have previously recorded losses on the program. These losses included additional losses of $ 570 million recognized during the second quarter of 2025 as a result of revisions to our cost and sales estimate. We have been in discussions with the Canadian government to potentially restructure certain contractual terms and conditions that may be beneficial to both parties. As of June 28, 2026, cumulative losses recognized on the program remained at approximately $ 670 million, of which $ 365 million
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remained accrued in other current liabilities on our consolidated balance sheet. Contract assets were approximately $ 585 million as of June 28, 2026. Any restructuring discussions may be prolonged or unsuccessful, and could result in a contract termination, and are dependent upon Canadian government resources and priorities and other factors outside of our control, such as trade relations with the United States. These items in addition to future performance issues or changes in our estimates, or dependencies on suppliers may affect our ability to recover our costs, including recovery of the contract assets recognized on our consolidated balance sheets and our assessment of the reach-forward loss, and potential damages, which could be material to our financial results in any period that they are recognized.
Türkish Utility Helicopter Program
As previously disclosed, sanctions imposed in 2020 by the U.S. Government on Turkey’s defense procurement agency (SSB) and certain persons affected our ability to perform under our contracts with Türkish industry for the Türkish Utility Helicopter Program (TUHP), which anticipates co-production with Türkish industry for production of T70 helicopters for use in Türkiye, as well as the related provision of Türkish goods and services under buy-back or offset obligations. During the second quarter of 2025, we recognized a loss of $ 95 million in light of the status of restructuring discussions with our prime customer and the status of the TUHP. In the fourth quarter of 2025, we finalized an agreement with our prime contract customer to terminate the existing TUHP contracts and establish new contracts for a reduced scope of work, which became effective in January 2026. Our performance under the new contracts is subject to the receipt of U.S. export authorizations. We have obtained an amendment to our manufacturing license agreement and have now received the remaining licenses needed to support our obligations under the new contracts. With all required licenses in place, the risk of customer drawdown on letters of credit linked to obtaining these licenses has been eliminated. As of June 28, 2026, cumulative losses recognized to date on the program remained at approximately $ 130 million.
United Launch Alliance Investment
We hold a 50 % membership interest in United Launch Alliance (ULA), with The Boeing Company (Boeing) holding the other 50 % interest. We account for this investment under the equity method, with $ 617 million and $ 551 million recorded in other noncurrent assets on our consolidated balance sheets at June 28, 2026 and December 31, 2025, respectively. During the first quarter of 2026, ULA’s Vulcan Centaur rocket experienced performance challenges that are negatively affecting ULA’s financial condition and results of operations. In the second quarter of 2026, we agreed to guarantee certain ULA borrowings under which maximum potential future payments amount to $ 500 million. The fair value of the guarantee obligation we recognized in the second quarter of 2026 amounts to $ 64 million and our investment in ULA has increased by a corresponding amount. We and Boeing expect to provide additional financial support to ULA to support its liquidity or ongoing operations and could incur impairment and operating losses if the Vulcan Centaur rocket does not perform consistent with ULA’s assumptions.
Backlog
Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. It is converted into sales in future periods as work is performed or deliveries are made. For our cost-reimbursable and fixed-priced-incentive contracts, the estimated consideration we expect to receive pursuant to the terms of the contract may exceed the contractual award amount. The estimated consideration is determined at the outset of the contract and is continuously reviewed throughout the contract period. In determining the estimated consideration, we consider the risks related to the technical, schedule and cost impacts to complete the contract and an estimate of any variable consideration. Periodically, we review these risks and may increase or decrease backlog accordingly. As the risks on such contracts are successfully retired, the estimated consideration from customers may be reduced, resulting in a reduction of backlog without a corresponding recognition of sales. As of June 28, 2026, our ending backlog was $ 230.4 billion. The increase in backlog of $ 36.8 billion during the six months ended June 28, 2026 was primarily due to an undefinitized contractual action (UCA) awarded for the THAAD program at our MFC business segment. We expect to recognize approximately 30 % of our backlog over the next 12 months and a total of approximately 50 % over the next 24 months as revenue with the remainder recognized thereafter.
Income Taxes
Our effective income tax rates were 15.7 % and 15.9 % for the quarter and six months ended June 28, 2026 and 18.0 % and 16.3 % for the quarter and six months ended June 29, 2025. The lower effective income tax rates for the quarter and six months ended June 28, 2026 were primarily attributable to lower interest expense on our uncertain tax position and the reach-forward losses recognized in 2025. The rates for all periods benefited from the tax deductions for foreign derived deduction eligible income, research and development tax credits, dividends paid to our defined contribution plans with an employee stock ownership plan feature and employee equity awards.
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NOTE 11 - RECENT ACCOUNTING PRONOUNCEMENTS
In September 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This guidance removes all references to project stages throughout FASB Accounting Standards Codification (ASC) Subtopic 350-40, Internal-Use Software and clarifies the threshold entities apply to begin capitalizing costs. Under the new standard, cost capitalization should only commence when an entity has committed to funding a software project and it is probable the project will be completed and the software will be used for its intended function. The amendments are effective for annual and interim reporting periods beginning January 1, 2028. Entities may apply the guidance using a prospective, retrospective or modified transition approach. Early adoption is permitted as of the beginning of an annual reporting period. We will adopt the ASU on its effective date of January 1, 2028.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . The ASU requires entities to disclose certain expenses, including purchases of inventory, employee compensation, depreciation, and intangible asset amortization, by caption. In addition, entities must provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The amendments are effective for annual reporting periods beginning January 1, 2027, and for interim reporting periods beginning after January 1, 2028. We are evaluating the impact of this ASU and expect the standard will only affect our disclosures and will not impact our results of operations or financial condition.
NOTE 12 - SUBSEQUENT EVENTS
On July 6, 2026, we announced that we entered into a definitive agreement to acquire Ultra Maritime Solutions (Ultra Maritime), a global defense company specializing in advanced undersea warfare and anti-submarine capabilities for allied naval forces, for $ 3.45 billion. We expect to fund the acquisition with cash on hand and additional financing arrangements. The transaction is subject to regulatory reviews and approvals and customary closing conditions, and is expected to close in the fourth quarter of 2026.
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Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Lockheed Martin Corporation
Results of Review of Interim Financial Statements
We have reviewed the accompanying consolidated balance sheet of Lockheed Martin Corporation (the Company) as of June 28, 2026, the related consolidated statements of earnings, comprehensive income and equity for the quarters and six months ended June 28, 2026 and June 29, 2025, the consolidated statements of cash flows for the six months ended June 28, 2026 and June 29, 2025, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2025, the related consolidated statements of earnings, comprehensive income, cash flows and equity for the year then ended, and the related notes (not presented herein); and in our report dated January 29, 2026, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2025, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ Ernst & Young LLP
Tysons, Virginia
July 23, 2026
25
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