LOCKHEED MARTIN CORP

Previous wording

We are a global aerospace and defense company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. We also provide a broad range of management, engineering, technical, scientific, logistics, system integration and cybersecurity services. Our main areas of focus are in defense, space, intelligence, homeland security and information technology, including cybersecurity. We serve both U.S. and international customers with products and services that have defense, civil and commercial applications, with our principal customers being agencies of the U.S. Government. During thequarter 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. Government) and 1% were from U.S. commercial and other customers.

Current wording

We are a global aerospace and defense company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. We also provide a broad range of management, engineering, technical, scientific, logistics, system integration and cybersecurity services. Our main areas of focus are in defense, space, intelligence, homeland security and information technology, including cybersecurity. We serve both U.S. and international customers with products and services that have defense, civil and commercial applications, with our principal customers being agencies of the U.S. Government. During thesix months ended June 29, 2025, 73% of our $36.1 billion in sales were from the U.S. Government, either as a prime contractor or as a subcontractor (including 63% from the Department of Defense (DoD)), 27% were from international customers (including foreign military sales (FMS) contracted through the U.S. Government).

Previous wording

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. 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.

Current wording

Our business and financial performance are impacted by general economic conditions including inflationary pressures, delays and disruptions in supply chains, business slowdowns or shutdowns, workforce challenges and labor shortfalls, and market volatility. These macroeconomic factors have contributed, and may continue to contribute, to increased costs, delays, disruptions and other performance challenges, as well as competing demands for limited resources to address such increased costs and other challenges, for our company, our suppliers and partners, and our customers.

Previous wording

We continue to experience supply chain challenges, including supplier shortages and performance issues. These issues have delayed certain customer deliveries, have been a limiting factor on our ability to ramp up production in response to customer demand for certain products and have caused out-of-sequence manufacturing, which increases costs and decreases operational efficiency. In addition, elevated levels of inflation and macroeconomic conditions present risks for us, our suppliers and the stability of the broader defense industrial base. Certain costs, including rising labor rates and supplier costs, have increased as a result of inflation, and have adversely affected our margins on certain programs. In addition, some suppliers are reducing the duration of pricing validity of their proposals to us or seeking to reopen pricing on existing agreements, which is operationally challenging and increases the risk of cost volatility. We continue to work to mitigate challenges caused by the supply chain or current macroeconomic environment on our business, including by supporting small business and at-risk suppliers, deploying resources to work with our supply chain, securing materials and support by executing long-term contracts, enforcing existing contract terms, identifying alternative sources, collaborating with our customers to address industry-wide challenges, and optimizing our supply chain organization through digital transformation and workforce development. If we experience significant supply chain issues or high rates of inflation, and are unable to successfully mitigate the impact, our future profits, margins and cash flows, particularly for existing fixed-price contracts, may be adversely affected. Inflation and higher interest rates can also constrain the overall purchasing power of our customers for our products and services potentially impacting future orders, especially in a budget constrained environment. We remain committed to our ongoing efforts to increase the efficiency of our operations and improve the cost competitiveness and affordability of our products and services, which may, in part, offset cost increases from inflation.

Current wording

We continue to experience supply chain challenges, including supplier shortages and performance issues. These issues have delayed certain customer deliveries, limited our ability to ramp up production in response to customer demand for certain products and have caused out-of-sequence manufacturing, which increases costs and decreases operational efficiency. In addition, elevated levels of inflation and macroeconomic conditions present risks for us, our suppliers and the stability of the broader defense industrial base. Certain costs, including rising labor rates and supplier costs, have increased as a result of inflation, and have adversely affected our margins on certain programs. In addition, some suppliers are reducing the duration of pricing validity of their proposals to us or seeking to reopen pricing on existing agreements, which is operationally challenging and increases the risk of cost volatility. Supply chain challenges, including both the availability and cost of goods, may be further impacted due to the imposition of tariffs and the availability of rare earth minerals, as discussed below under “Recent Developments in Trade and Regulatory Policies.” We continue to work to mitigate challenges caused by the supply chain or current macroeconomic environment on our business, including by supporting small business and at-risk suppliers, deploying resources to work with our supply chain, securing materials and support by executing long-term contracts, enforcing existing contract terms, identifying alternative sources, collaborating with our customers to address industry-wide challenges, and optimizing our supply chain organization through digital transformation and workforce development. If we experience significant supply chain issues or high rates of inflation, and are unable to successfully mitigate the impact, our future profits, margins and cash flows, particularly for existing fixed-price contracts, may be adversely affected. Inflation and higher interest rates can also constrain the overall purchasing power of our customers for our products and services potentially impacting future orders, especially in a budget constrained environment. We remain committed to our ongoing efforts to increase the efficiency of our operations and improve the cost competitiveness and affordability of our products and services, which may, in part, offset cost increases from inflation.

Previous wording

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.

Current wording

For additional risks to the company related to the supply chain and availability of materials, see Part I, Item 1A, “Risk Factors” of our 2024 Form 10-K.

Previous wording

Certain materials and component parts that go into making our products are imported into the U.S. and are subject to tariffs, sanctions, embargoes, export and import controls, and other trade restrictions. The U.S. Government 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. For example, in April 2025, the U.S. 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. We also export certain products to other countries that may take actions in response to these tariffs. For example, Canada has imposed a 25% surtax on certain U.S. goods. In addition, recent government actions relating to rare earth minerals used in certain of our products, including U.S. 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. Significant changes in tax, trade, or other policies either in the U.S. or other countries, as well as any fluctuation in foreign exchange rates as a result of such activity, could materially increase our tax burden, the price we pay for materials and component parts, the price our customers pay, and result in delays in products received or non-delivery from our vendors as well as impact the availability of materials (including rare earth minerals), which could materially impact our business and financial results. We are pursuing available options to fully or substantially mitigate the impact of the increased tariffs or any future tariffs, including seeking exclusions, through drawbacks, refunds, recovering the costs in the pricing of our products, or securing alternative sources of materials or products. 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. The tariffs that have been enacted or expanded by the U.S. or other countries did not materially impact our business or financial results for the quarter ended March 30, 2025. We are currently evaluating the potential future impacts of the imposition of the announced tariffs to our business and financial condition. At this time, we do not believe that the tariffs announced by the U.S. or actions taken in response to these tariffs by other countries will have a material adverse effect upon our results of operations, financial condition, or cash flows. However, the actual impact of the new tariffs is subject to a number of factors including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any countermeasures that the target countries may take, how our Tier 1 and Tier 2 suppliers react, possibl…

Excerpt shortened here; the source contains the full paragraph.

Current wording

The tariffs that have been enacted or expanded by the U.S. or other countries did not materially impact our business or financial results for the six months ended June 29, 2025. We are currently evaluating the potential future impacts of the imposition of the announced tariffs to our business and financial condition. At this time, we do not believe that the tariffs announced by the U.S. or actions taken in response to these tariffs by other countries will have a material adverse effect upon our results of operations, financial condition, or cash flows. However, the actual impact of the new tariffs is subject to a number of factors including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any countermeasures that the target countries may take, how our Tier 1 and Tier 2 suppliers react, possible substitution effects, possible duty drawbacks, and any mitigating actions that may become available.

Previous wording

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. 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. While the impact of these reforms on our business is uncertain, they could potentially lead to changes in the way we interact with the U.S. Government, and we will continue to monitor and assess their effects on our business and financial results. Should the U.S. Government review one or more major defense programs in which we provide products and/or services, and this review leads to a full or partial cancellation of one of these programs, this could have an adverse effect on our business, financial condition, results of operations and cash flows.

Current wording

Lastly, the President has issued multiple Executive Orders, including two that are intended to (i) simplify and accelerate the procurement process through an overhaul of the Federal Acquisition Regulation (FAR), and its supplements and (ii) modernize the defense acquisition process by promoting commercial solutions, use of innovative acquisition authorities, and other existing streamlined processes. Among the actions directed by the President is a review of major defense acquisition programs that are more than 15% behind schedule or over budget, or not aligned with the Administration’s priorities, including identifying any programs for potential cancellation. While the impact of these reforms on our business is uncertain, they could potentially lead to changes in the way we interact with the U.S. Government, and we will continue to monitor and assess their effects on our business and financial results. Should the U.S. Government review one or more major defense programs in which we provide products and/or services, and this review leads to a full or partial cancellation of one of these programs, this could have an adverse effect on our business, financial condition, results of operations and cash flows.

Previous wording

Our primary customer is the U.S. Government, from which we derive 72% of our sales, including 63% from the U.S. DoD. Funding for U.S. 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. Government domestic and international priorities. U.S. Government spending levels, particularly defense spending, and timely funding thereof can affect our financial performance over the short and long term.

Current wording

Our primary customer is the U.S. Government, from which we derived 73% of our sales during the six months ended June 29, 2025, including 63% from the U.S. DoD. Funding for U.S. Government programs is subject to a variety of factors that can affect our business, including the administration’s budget requests and procurement priorities and policies, annual congressional budget authorization and appropriation processes, and other U.S. Government domestic and international priorities. U.S. Government spending levels, particularly defense spending, and timely funding thereof can affect our financial performance over the short and long term.

Previous wording

On March 15, 2025, the President signed into law the Full-Year Continuing Appropriations and Extensions Act, 2025 (the Act), which funds the U.S. Government under a continuing resolution through September 30, 2025, its fiscal year (FY) end. In total, the FY 2025 continuing resolution funding is roughly equivalent to the U.S. Government’s FY 2024 funding with a few anomalies and other smaller shifts in funding between appropriations titles. The Act increases the DoD FY 2025 base budget by $6 billion to a total of $831.5 billion, while reducing nondefense spending. Unlike other continuing 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.

Current wording

On March 15, 2025, the President signed into law the Full-Year Continuing Appropriations and Extensions Act, 2025 (the Act), which funds the U.S. Government under a continuing resolution through September 30, 2025, its fiscal year (FY) end. In total, the FY 2025 continuing resolution funding is roughly equivalent to the U.S. Government’s FY 2024 funding with a few anomalies and other smaller shifts in funding between appropriations titles. The Act increases the DoD FY 2025 base budget by $6 billion to a total of $831.5 billion, while reducing nondefense spending. Unlike other continuing resolution funding measures, the Act provides the DoD conditional authority to permit new program starts as long as they were included in the FY 2025 House or FY 2025 Senate appropriation bills and $8 billion in flexible funding, furthering the flexibility of DoD operating under a continuing resolution.

Previous wording

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. The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs. Additionally, the administration continues to take steps to evaluate government-wide and defense-specific staffing and procurement, which includes assessing mission priorities, procurement methods, program performance, and other factors and then potentially taking action based on those assessments. Those actions remain uncertain and could result in impacts to both our current and future business prospects and financial performance.

Current wording

We anticipate the federal budget, debt ceiling, additional potential tax law changes and regulatory environment will continue to be subject to debate and compromise shaped by, among other things, the new Administration and Congress, heightened political tensions, the global security environment, inflationary pressures, and macroeconomic conditions. The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs. Additionally, the administration continues to take steps to evaluate government-wide and defense-specific staffing and procurement, which includes assessing mission priorities, procurement methods, program performance, and other factors and then potentially taking action based on those assessments. Those actions remain uncertain and could result in impacts to both our current and future business prospects and financial performance.

Previous wording

See also the discussion of U.S. Government funding risks, in Part I, Item 1A, “Risk Factors” included in our 2024 Form 10-K.

Current wording

See also the discussion of U.S. Government funding risks, in Part I, Item 1A, “Risk Factors” of our 2024 Form 10-K.

Previous wording

Product sales increased $740 million, or 5%, during the quarter ended March 30, 2025, compared to the same period in 2024. The increase was primarily attributable to higher product sales of approximately $355 million at MFC, $255 million at RMS and $155 million at Aeronautics. Higher product sales at MFC were due to production ramp-up on Joint Air-to-Surface Standoff Missile (JASSM), Long Range Anti-Ship Missile (LRASM), and precision fires programs. Higher product sales at RMS were due to higher volume on the Canadian Surface Combatant (CSC) and Black Hawk programs. Higher product sales at Aeronautics were due to higher volume on F-35 production contracts.

Current wording

Product sales during the quarter ended June 29, 2025 were comparable to the same period in 2024. Higher product sales of approximately $325 million at MFC and $100 million at Space were offset by lower product sales of $375 million at RMS. Higher product sales at MFC were due to production ramp-up on Joint Air-to-Surface Standoff Missile (JASSM), Long Range Anti-Ship Missile (LRASM), and precision fires programs. Higher product sales at Space were due to higher volume on Orion and Next Generation Interceptor (NGI) programs partially offset by lower product sales due to program lifecycle on the Next Generation Overhead Persistent Infrared (Next Gen OPIR) system. Lower product sales at RMS were due to lower volume on radar and the Canadian Surface Combatant (CSC) programs, and the unfavorable cumulative adjustments to sales driven by recognizing a loss on Türkish Utility Helicopter Program (TUHP) as previously described. Product sales for Aeronautics were comparable as higher volume on F-35 production contracts was mostly offset by the unfavorable cumulative adjustment to sales driven by recognizing a loss on a classified contract in the second quarter of 2025. See “Note 10 – Other” included in our Notes to Consolidated Financial Statements for further details about program losses incurred at Aeronautics and RMS.

Previous wording

Service sales during the quarter ended March 30, 2025 were comparable to the same period in 2024.

Current wording

Service sales during the quarter ended June 29, 2025 were comparable to the same period in 2024. Lower service sales of approximately $180 million at RMS were offset by higher service sales of approximately $155 million at Aeronautics. Lower service sales at RMS were due to the unfavorable cumulative adjustment to sales driven by recognizing a loss on Canadian Maritime Helicopter Program (CMHP) as previously described. Higher service sales at Aeronautics were due to higher volume on F-35 sustainment contracts.

Previous wording

Product costs increased $400 million, or 3%, during the quarter ended March 30, 2025, compared to the same period in 2024. The increase was primarily attributable to higher product costs of approximately $200 million at MFC, $195 million at RMS and $115 million at Aeronautics. Higher product costs at MFC, RMS and Aeronautics were due to higher volume and production ramp up as described above in “Product Sales”.

Current wording

Product costs increased $949 million, or 7%, during the quarter ended June 29, 2025, compared to the same period in 2024. The increase was primarily attributable to higher product costs of approximately $880 million at Aeronautics and $285 million at MFC, partially offset by lower product costs of approximately $290 million at RMS. Higher product costs at Aeronautics were due to the impact of recognizing a loss on a classified contract in the second quarter of 2025 and higher volume as described above in “Product Sales”. Higher product costs at MFC were due to production ramp up as described above in “Product Sales”. Lower product costs at RMS were due to lower volume as described above in “Product Sales”.

Previous wording

Other unallocated, net primarily includes the FAS/CAS pension operating adjustment (which represents the difference between total CAS pension cost recorded in our business segments’ results of operations and the service cost component of FAS pension (expense) income), stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, intangible asset amortization expense and other corporate costs. These items are not allocated to the business segments and, therefore, are not allocated to operating costs and expenses for products or services. Other unallocated, net reduced operating expenses by $284 million and $285 million during the quarters ended March 30, 2025 and March 31, 2024.

Current wording

Other unallocated, net primarily includes the FAS/CAS pension operating adjustment (which represents the difference between total CAS pension cost recorded in our business segments’ results of operations and the service cost component of FAS pension (expense) income), stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, intangible asset amortization expense and other corporate costs. These items are not allocated to the business segments and, therefore, are not allocated to operating costs and expenses for products or services. Other unallocated, net reduced operating expenses by $244 million and $528 million during the quarter and six months ended June 29, 2025, compared to $197 million and $482 million during the quarter and six months ended June 30, 2024. The increase in other unallocated, net was primarily due to higher gains from the changes in the fair value of assets and liabilities related to deferred compensation plans during the quarter and six months ended June 29, 2025 compared to the same periods in 2024 and fluctuations in costs associated with various corporate items, none of which were individually significant.

Previous wording

Other income, net was $49 million and $36 million during the quarters ended March 30, 2025 and March 31, 2024. Other income, net, primarily includes earnings generated by equity method investees, as well as gains or losses for acquisitions, divestitures, and other items, none of which are individually significant. The increase in other income, net during the quarter ended March 30, 2025 resulted primarily from an intellectual property license arrangement.

Current wording

Other income, net during the quarter ended June 29, 2025 was comparable to the same period in 2024. Other income, net was $63 million and $54 million during the six months ended June 29, 2025 and June 30, 2024. Other income, net, primarily includes earnings generated by equity method investees, as well as gains or losses for acquisitions, divestitures, and other items, none of which are individually significant. The increase in other income, net during the six months ended June 29, 2025 resulted primarily from an intellectual property license arrangement.

Previous wording

Interest expense was $268 million and $255 million during the quarters ended March 30, 2025 and March 31, 2024. The increase in interest expense in 2025 resulted primarily from the issuance of senior unsecured notes in January and December 2024.

Current wording

Interest expense was $274 million and $542 million during the quarter and six months ended June 29, 2025, compared to $261 million and $516 million during the quarter and six months ended June 30, 2024. The increase in interest expense in 2025 resulted primarily from the issuance of commercial paper and senior unsecured notes in December 2024.

Previous wording

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. 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.

Current wording

Non-service FAS pension expense was $99 million and $197 million during the quarter and six months ended June 29, 2025, compared to non-service FAS pension income of $15 million and $31 million during the quarter and six months ended June 30, 2024. The increase in expense was primarily due to higher prior service cost amortization and a reduced asset base as detailed in “Note 6 - Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements.

Previous wording

Other non-operating income, net primarily includes gains or losses related to adjustments in valuation of early-stage company investments or gains or losses upon the sale of these investments and interest income earned on cash and cash equivalents. Other non-operating income, net was $30 million and $45 million during the quarters ended March 30, 2025 and March 31, 2024. See “Note 8 - Fair Value Measurements” included in our Notes to Consolidated Financial Statements for additional information.

Current wording

Other non-operating income, net primarily includes gains or losses related to adjustments in valuation of early-stage company investments or gains or losses upon the sale of these investments and interest income earned on cash and cash equivalents. Other non-operating income, net was $42 million and $72 million during the quarter and six months ended June 29, 2025, compared to $46 million and $91 million during the quarter and six months ended June 30, 2024. See “Note 8 - Fair Value Measurements” included in our Notes to Consolidated Financial Statements for additional information.

Previous wording

Our effective income tax rates were 15.9% and 15.8% for the quarters ended March 30, 2025 and March 31, 2024. 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.

Current wording

Our effective income tax rates were 18.0% and 16.3% for the quarter and six months ended June 29, 2025 and 15.8% for both the quarter and six months ended June 30, 2024. The higher effective income tax rates for the quarter and six months ended June 29, 2025 were primarily attributable to increased interest expense on our uncertain tax position partially offset by changes in pre-tax earnings due to program losses previously described. The rates for all periods benefited from tax deductions for foreign derived intangible income, research and development tax credits, dividends paid to our defined contribution plans with an employee stock ownership plan feature and employee equity awards.

Previous wording

Changes in U.S. (federal or state) or foreign tax laws and regulations, or their interpretation and application (including those with retroactive effect), such as the amortization for research and development expenditures, could significantly impact our provision for income taxes, the amount of taxes payable, our deferred tax asset and liability balances, and stockholders’ equity. In addition to future changes in tax laws, the amount of net deferred tax assets will change periodically based on several factors, including the measurement of our postretirement benefit plan obligations, actual cash contributions to our postretirement benefit plans and the change in the amount or reevaluation of uncertain tax positions.

Current wording

Changes in U.S. (federal or state) or foreign tax laws and regulations, or their interpretation and application (including those with retroactive effect), could significantly impact our provision for income taxes, the amount of taxes payable, our deferred tax asset and liability balances, and stockholders’ equity. In addition to future changes in tax laws, the amount of net deferred tax assets will change periodically based on several factors, including the measurement of our postretirement benefit plan obligations, actual cash contributions to our postretirement benefit plans and the change in the amount or reevaluation of uncertain tax positions.

Previous wording

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. 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. We do not expect Pillar 2 to have a material impact on our effective tax rate or our financial condition and results of operations.

Current wording

The Organisation for Economic Co-operation and Development (OECD) has established a framework for a global minimum corporate tax of 15%, known as Pillar 2, which will be applied on a country-by-country basis to companies with global revenues and profits above certain thresholds. The implementation of Pillar 2 is phased, with certain aspects effective on January 1, 2024, and others on January 1, 2025. Although the United States has not enacted legislation to adopt Pillar 2, and its future adoption is uncertain, several countries where we operate have enacted such legislation, and others are in the process of doing so. We do not expect Pillar 2 to have a material impact on our effective tax rate or our financial condition and results of operations.

Previous wording

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. Net earnings and earnings per share for the quarter ended March 30, 2025 were affected by the factors mentioned above. 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.

Current wording

We reported net earnings of $342 million ($1.46 per share) and $2.1 billion ($8.75 per share) during the quarter and six months ended June 29, 2025 and $1.6 billion ($6.85 per share) and $3.2 billion ($13.24 per share) during the quarter and six months ended June 30, 2024. Net earnings and earnings per share for the quarter and six months ended June 29, 2025 were affected by the factors mentioned above. Earnings per share also benefited from a net decrease of approximately 5.3 million and 5.8 million weighted average common shares outstanding during the quarter and six months ended June 29, 2025, compared to the same periods in 2024. The reduction in weighted average common shares was a result of share repurchases, partially offset by share issuances under our stock-based awards and certain defined contribution plans.

Previous wording

Business segment operating profit excludes the FAS/CAS pension operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government Cost Accounting Standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance. See “Note 3 - Information on Business Segments – Unallocated Items”.

Current wording

Business segment operating profit excludes the FAS/CAS pension operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government Cost Accounting Standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance. See “Note 3 - Information on Business Segments – Unallocated Items” included in our Notes to Consolidated Financial Statements for additional information.

Previous wording

requirements under U.S. GAAP. The FAS/CAS pension operating adjustment represents the difference between CAS pension cost included in segment operating income and the service cost component of FAS pension (expense) income included in consolidated operating profit. To the extent that CAS pension cost exceeds the service cost component of FAS pension (expense) income we have a favorable FAS/CAS pension operating adjustment. The non-service FAS pension (expense) income components are included in non-service FAS pension (expense) income on our consolidated statements of earnings.

Current wording

Our business segment results of operations include pension expense as calculated under CAS, which we refer to as CAS pension cost. We recover CAS pension and other postretirement benefit plan cost through the pricing of our products and services on U.S. Government contracts and, therefore, recognize CAS pension cost in each business segments’ sales and operating costs and expenses. Our consolidated financial statements must present pension and other postretirement benefit plan (expense) income calculated in accordance with Financial Accounting Standards (FAS) requirements under U.S. GAAP. The FAS/CAS pension operating adjustment represents the difference between CAS pension cost included in segment operating income and the service cost component of FAS pension (expense) income included in consolidated operating profit. To the extent that CAS pension cost exceeds the service cost component of FAS pension (expense) income we have a favorable FAS/CAS pension operating adjustment. The non-service FAS pension (expense) income components are included in non-service FAS pension (expense) income on our consolidated statements of earnings.

Previous wording

Many of our contracts span several years and include highly complex technical requirements. At the outset of a contract accounted for under the percentage-of-completion cost-to-cost method, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract 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. Profit booking rates may increase during the performance of the contract if we successfully retire risks related to the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract or may increase the variable consideration we expect to receive on the contract. Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase or our estimates of variable consideration we expect to receive decrease. The profit booking rate may also be adjusted if the total estimated value of the contract changes or there is a contract modification. All of the estimates are subject to change during the performance of the contract and may affect the profit booking rate. For further discussion on fixed-price contracts, see “Note 10 - Other” included in our Notes to Consolidated Financial Statements.

Current wording

Many of our contracts span several years and include highly complex technical requirements. At the outset of a contract accounted for under the percentage-of-completion cost-to-cost method, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract, as well as our ability to earn variable consideration, and assess the effects of those risks on our estimates of sales and total costs to complete the contract. The estimates consider the technical requirements (e.g., a newly developed product versus a mature product), the schedule and associated tasks (e.g., the number and type of milestone events) and costs (e.g., material, labor, subcontractor, overhead and the estimated costs to fulfill our industrial cooperation agreements, sometimes referred to as offset or localization agreements, required under certain contracts with international customers). The initial profit booking rate of each contract considers risks surrounding the ability to achieve the technical requirements, schedule and costs in the initial estimated total costs to complete the contract and variable considerations. Profit booking rates may increase during the performance of the contract if we successfully retire risks related to the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract or may increase the variable consideration we expect to receive on the contract. Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase or our estimates of variable consideration we expect to receive decrease. The profit booking rate may also be adjusted if the total estimated value of the contract changes or there is a contract modification. All of the estimates are subject to change during the performance of the contract and may affect the profit booking rate. For further discussion on fixed-price contracts, see “Note 10 - Other” included in our Notes to Consolidated Financial Statements.

Previous wording

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

Current wording

During the quarter ended June 29, 2025, we recorded losses of $950 million on an ongoing classified program at our Aeronautics business segment, and $570 million on CMHP and $95 million on TUHP at our RMS business segment. During the six months ended June 29, 2025, in addition to the losses above, we recorded $125 million of adjustments resulting from favorable performance upon completion on certain commercial civil space programs at Space and an $80 million favorable adjustment upon completion of a classified program at Aeronautics. During the six months ended June 30, 2024 we recognized a reach-forward loss of $100 million on a classified program at our MFC business segment.

Previous wording

Aeronautics’ sales during thequarter ended March 30, 2025 increased $212 million, or 3%, compared to the same period in 2024. This increase was primarily driven by a $215 million increase in sales from the F-35 program, resulting from higher volume on production contracts.

Current wording

Aeronautics’ sales during thequarter ended June 29, 2025 increased $143 million, or 2%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $470 million on the F-35 program due to higher volume on production contracts. This increase was partially offset by a $360 million unfavorable cumulative adjustment to sales driven by the loss on a classified contract as previously described.

Previous wording

MFC’s sales during thequarter ended March 30, 2025 increased $380 million, or 13%, compared to the same period in 2024. 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.

Current wording

MFC’s sales during the quarter ended June 29, 2025 increased $331 million, or 11%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $330 million on tactical and strike missile programs due to production ramp-up on JASSM, LRASM and precision fires programs.

Previous wording

MFC’s operating profit during thequarter ended March 30, 2025 increased $154 million, or 50%, compared to the same period in 2024. This increase was attributable to two main factors: a $135 million increase in profit booking rate adjustments and a $25 million increase from production ramp-up, as described above. 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).

Current wording

MFC’s operating profit during the six months ended June 29, 2025 increased $183 million, or 24%, compared to the same period in 2024. This increase was attributable to two primary factors: a $110 million increase in profit booking rate adjustments and a $60 million volume increase driven by production ramp-up as described above. The increase in profit booking rate adjustments was primarily due to a $100 million loss recognized on a classified program and an unfavorable profit adjustment on Hellfire in the first quarter of 2024 that did not recur, partially offset by lower favorable profit adjustments on PAC-3 in 2025.

Previous wording

Aeronautics’ operating profit during thequarter ended March 30, 2025 increased $41 million, or 6%, compared to the same period in 2024. This increase was attributable to two main factors: a $20 million increase in profit booking rate adjustments and a $20 million increase from higher volume, as described above. The increase in profit booking rate adjustments was primarily due to an $80 million adjustment resulting from favorable performance at completion on a classified program, partially offset by lower profit rate adjustments on C-130 programs.

Current wording

Space’s operating profit during the quarter ended June 29, 2025 increased $16 million, or 5%, compared to the same period in 2024. This increase was attributable to a $20 million increase in profit booking rate adjustments primarily due to favorable performance at completion on certain commercial civil space programs.

Previous wording

Space’s operating profit during the quarter ended March 30, 2025 increased $54 million, or 17%, compared to the same period in 2024. 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). The increase in profit booking rate adjustments was primarily due to favorable performance at completion on certain commercial civil space programs.

Current wording

Space’s operating profit during the six months ended June 29, 2025 increased $70 million, or 10%, compared to the same period in 2024. This increase was attributable to an $105 million increase in profit booking rate adjustments partially offset by $20 million of lower equity earnings driven by lower launch volume from our investment in United Launch Alliance (ULA). The increase in profit booking rate adjustments was primarily due to favorable performance at completion on certain commercial civil space programs.

Previous wording

Total equity (losses)/earnings (ULA) represented approximately $(5) million, or (1)%, of Space's operating profit during thequarter ended March 30, 2025, compared to approximately $15 million, or 5% for the same period in 2024.

Current wording

Total equity earnings (ULA) represented approximately $10 million, or 3%, and $5 million, or 1%, of Space's operating profit during the quarter and six months ended June 29, 2025, compared to approximately $10 million, or 3%, and $25 million, or 4% for the same periods in 2024.

Previous wording

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. In addition, we have access to credit markets, if needed, for liquidity or general corporate purposes. This access includes our $3.0 billion revolving credit facility or the ability to issue commercial paper. There were no borrowings outstanding under the revolving credit facility or the commercial paper program at both March 30, 2025 and December 31, 2024.

Current wording

At June 29, 2025, we had cash and cash equivalents of $1.3 billion that was generally available to fund ordinary business operations without significant legal, regulatory or other restrictions. Our principal source of liquidity is our cash from operations and access to credit markets. Access to credit markets includes our $3.0 billion revolving credit facility, including the ability to issue commercial paper. As of June 29, 2025, we had no borrowings outstanding under the revolving credit facility and $1.4 billion in commercial paper borrowings at a weighted average rate of 4.55%. As of December 31, 2024, there were no borrowings outstanding under the revolving credit facility or the commercial paper program. We may, as conditions warrant, continue to issue commercial paper backed by our revolving credit facility to manage the timing of cash flows.

Previous wording

Cash received from customers is our primary source of cash from operations. However, from time to time, we fund customer programs ourselves pending government appropriations. If we incur costs in excess of funds obligated on the contract or in advance of a contract award, this negatively affects our cash flows, and we may be at risk for reimbursement of the excess costs. 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. See “Recent Developments in Trade and Regulatory Policies” included within the “Business Overview” discussion above.

Current wording

Additionally, increases in costs due to tariffs may impact our cash flows, as we may not be able to fully recover these costs, and even if recovery is possible, it may not occur in the same period as the incurred costs. See “Recent Developments in Trade and Regulatory Policies” included within the “Business Overview” discussion above.

Previous wording

Billing timetables and payment terms on our contracts vary based on a number of factors, including the contract type. We generally bill and collect cash more frequently under cost-reimbursable contracts, which represented approximately 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. 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.

Current wording

Billing timetables and payment terms on our contracts vary based on a number of factors, including the contract type. We generally bill and collect cash more frequently under cost-reimbursable contracts, which represented approximately 41% of the sales we recorded during the six months ended June 29, 2025, as we are authorized to bill as the costs are incurred. A number of our fixed-price contracts may provide for performance-based payments, which allow us to bill and collect cash as we perform on the contract. The amounts of performance-based payments and the related milestones are determined in the negotiation of each contract. The timing of such payments may differ from the timing of the costs incurred related to our contract performance, thereby affecting our cash flows.

Previous wording

We continue to return cash to stockholders through dividends and share repurchases. 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. The amount of shares ultimately purchased and the timing of purchases are at the discretion of management and subject to compliance with applicable law and regulation.

Current wording

We continue to return cash to stockholders through dividends and share repurchases. The remaining authorization under our share repurchase program was $8.1 billion as of June 29, 2025. Theshare repurchase program does not have an expiration date and may be amended or terminated by the Board of Directors at any time. The amount of shares ultimately purchased and the timing of purchases are at the discretion of management and subject to compliance with applicable law and regulation.

Previous wording

We continue to actively manage our debt levels, including maturities and interest rates. We seek to finance our business in a manner that preserves financial flexibility while minimizing borrowing costs to the extent practicable. We review changes in financial market and economic conditions to manage the types, amounts and maturities of our indebtedness. We may at times refinance existing indebtedness, vary our mix of variable-rate and fixed-rate debt or seek alternative financing sources for our cash and operational needs.

Current wording

We continue to actively manage our debt levels, including maturities and interest rates. We seek to finance our business in a manner that preserves financial flexibility while minimizing borrowing costs to the extent practicable. We review changes in financial market and economic conditions to manage the types, amounts and maturities of our indebtedness. We may at times refinance existing indebtedness, vary our mix of variable-rate and fixed-rate debt or seek alternative financing sources or arrangements for our cash and operational needs.

Previous wording

We also actively manage our pension obligations and expect to continue to opportunistically manage our pension liabilities through the purchase of group annuity contracts or other actions for portions of our outstanding defined benefit pension obligations using assets from the pension trust. Future pension risk transfer transactions could be significant and result in us making additional contributions to the pension trust. The required funding of our qualified defined benefit pension plans is determined in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), as amended, and CAS. We could be required to make pension contributions earlier than and/or in excess of what was planned if our return on pension assets is less than our assumptions, which would reduce our free cash flow. We may also make additional contributions at our discretion.

Current wording

We also actively manage our pension obligations and expect to continue to opportunistically manage our pension liabilities through the purchase of group annuity contracts or other actions for portions of our outstanding defined benefit pension obligations using assets from the pension trust. Future transactions could be significant and result in us making additional contributions to the pension trust. The required funding of our qualified defined benefit pension plans is determined in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), as amended, and CAS. We could be required to make pension contributions earlier than and/or in excess of what was planned if our return on pension assets is less than our assumptions, which would reduce our free cash flow. We may also make additional contributions at our discretion.

Previous wording

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.

Current wording

Free cash flow during thesix months ended June 29, 2025 decreased $2.0 billion compared to the same period in 2024 primarily due to operating cash flow drivers described above and higher software expenditures.

Previous wording

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. We also incur capital expenditures for information technology to support programs and general enterprise information technology infrastructure, inclusive of costs for the development or purchase of internal-use software.

Current wording

Net cash used for investing activities during thesix months ended June 29, 2025 increased $401 million compared to the same period in 2024, primarily due to a $360 million cash payment for the acquisition of Rapid Solutions. Capital expenditures totaled $805 million and $748 million during the six months ended June 29, 2025 and June 30, 2024. The majority of our capital expenditures are for equipment and facilities infrastructure that generally are incurred to support new and existing programs across all of our business segments. We also incur capital expenditures for information technology to support programs and general enterprise information technology infrastructure, inclusive of costs for the development or purchase of internal-use software.