UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March ~~26, 2023~~31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number: 1-11437

LOCKHEED MARTIN CORPORATION

(Exact name of registrant as specified in its charter)

Maryland

52-1893632

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

6801 Rockledge Drive,

Bethesda,

Maryland

20817

(Address of principal executive offices)

(Zip Code)

(301) 897-6000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $1 par value	LMT	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non–accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were ~~253,252,553~~239,938,144 shares of our common stock, $1 par value per share, outstanding as of April ~~14, 2023.~~19, 2024.

Table of Contents

Lockheed Martin Corporation

Form 10-Q

For the Quarterly Period Ended March ~~26, 2023~~31, 2024

Table of Contents

Page

PART I. FINANCIAL INFORMATION

ITEM 1.

Financial Statements (Unaudited)

Consolidated Statements of Earnings for the Quarters Ended March 31, 2024 and March 26, 2023 ~~and March 27, 2022~~

Consolidated Statements of Comprehensive Income for the Quarters Ended March ~~26, 2023~~31, 2024 and March 2 7 ~~, 2022~~26, 2023

Consolidated Balance Sheets as of March ~~26, 2023~~ 31, 2024 and December 31, ~~2022~~2023

Consolidated Statements of Cash Flows for the Quarters Ended March ~~26, 2023~~31, 2024 and March 2 7 ~~, 2022~~26, 2023

Consolidated Statements of Equity for the Quarters Ended March ~~26, 2023~~31, 2024 and March 2 7 ~~, 2022~~26, 2023

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

2224

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2325

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

3739

ITEM 4.

Controls and Procedures

3739

PART II. OTHER INFORMATION

ITEM 1.

ITEM 1A.

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

ITEM 5.

ITEM 6.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Lockheed Martin Corporation

Consolidated Statements of Earnings

(unaudited; in millions, except per share data)

Quarters Ended

March 26,
2023

March 27,
2022

March 31,
2024

March 26,
2023

Net sales

Products

12,526

12,494

Products

Services

2,600

2,470

Total net sales

15,126

14,964

Total net sales

Cost of sales

Products

(11,151)

(11,107)

Products

Services

(2,284)

(2,167)

Other unallocated, net

355

219

Other unallocated, net

Total cost of sales

(13,080)

(13,055)

Gross profit

2,046

1,909

Other (expense) income, net

(9)

Gross profit

Other income (expense), net

Operating profit

2,037

1,933

Interest expense

(202)

(135)

Interest expense

Non-service FAS pension income

110

140

Other non-operating income, net

123

Other non-operating income, net

Earnings before income taxes

1,994

2,061

Earnings before income taxes

Income tax expense

(305)

(328)

Net earnings

1,689

1,733

Net earnings

Earnings per common share

Basic

6.63

6.46

Diluted

6.61

6.44

Diluted

Cash dividends paid per common share

3.00

2.80

Cash dividends paid per common share

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

March 26,
2023

March 27,
2022

March 31,
2024

March 26,
2023

Net earnings

1,689

1,733

Other comprehensive income, net of tax

Postretirement benefit plans

Amortization of actuarial losses and prior service credits, net of tax of $10 million in 2023 and $13 million in 2022

(37)

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

Other, net, net of tax of $4 million in 2023 and $1 million in 2022

(26)

(21)

Other comprehensive (loss) income, net of tax

(63)

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

Other, net, net of tax of $0 million in 2024 and $4 million in 2023

Other comprehensive (loss), net of tax

Comprehensive income

1,626

1,760

Comprehensive income

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)

March 26,
2023

December 31,
2022

(unaudited)

March 31,
2024

December 31,
2023

(unaudited)

Assets

Current assets

Cash and cash equivalents

2,440

2,547

Receivables, net

2,583

2,505

Receivables, net

Contract assets

13,189

12,318

Inventories

3,471

3,088

Inventories

Other current assets

461

533

Total current assets

22,144

20,991

Total current assets

Property, plant and equipment, net

7,938

7,975

Goodwill

10,776

10,780

Goodwill

Intangible assets, net

2,397

2,459

Deferred income taxes

4,175

3,744

Deferred income taxes

Other noncurrent assets

7,192

6,931

Total assets

54,622

52,880

Total assets

Liabilities and equity

Current liabilities

Accounts payable

3,271

2,117

Salaries, benefits and payroll taxes

2,634

3,075

Salaries, benefits and payroll taxes

Contract liabilities

8,336

8,488

Current maturities of long-term debt

115

118

Current maturities of long-term debt

Other current liabilities

2,626

2,089

Total current liabilities

16,982

15,887

Total current liabilities

Long-term debt, net

15,485

15,429

Accrued pension liabilities

5,422

5,472

Accrued pension liabilities

Other noncurrent liabilities

7,087

6,826

Total liabilities

44,976

43,614

Total liabilities

Stockholders’ equity

Common stock, $1 par value per share

254

Common stock, $1 par value per share

Additional paid-in capital

—

Retained earnings

17,478

16,943

Retained earnings

Accumulated other comprehensive loss

(8,086)

(8,023)

Accumulated other comprehensive loss

Total stockholders’ equity

9,646

9,266

Total liabilities and equity

54,622

52,880

Total liabilities and equity

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)

Quarters Ended

March 26,
2023

March 27,
2022

March 31,
2024

March 26,
2023

Operating activities

Net earnings

1,689

1,733

Net earnings

Adjustments to reconcile net earnings to net cash provided by operating activities

Depreciation and amortization

325

329

Depreciation and amortization

Stock-based compensation

Deferred income taxes

(117)

(31)

Changes in assets and liabilities

Receivables, net

(78)

(564)

Contract assets

(871)

(1,551)

Contract assets

Inventories

(383)

(163)

Accounts payable

1,217

1,829

Accounts payable

Contract liabilities

(152)

(205)

Income taxes

414

317

Income taxes

Qualified defined benefit pension plans

(94)

(116)

Other, net

(443)

(222)

Other, net

Net cash provided by operating activities

1,564

1,410

Investing activities

Capital expenditures

(294)

(268)

Other, net

Net cash used for investing activities

(259)

(251)

Financing activities

Issuance of long-term debt, net of related costs

Repurchases of common stock

(500)

(2,000)

Dividends paid

(784)

(767)

Dividends paid

Other, net

(128)

(113)

Net cash used for financing activities

(1,412)

(2,880)

Other, net

Net cash provided by (used for) financing activities

Net change in cash and cash equivalents

(107)

(1,721)

Cash and cash equivalents at beginning of period

2,547

3,604

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

2,440

1,883

Cash and cash equivalents at end of period

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

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Lockheed Martin Corporation

Consolidated Statements of Equity

(unaudited; in millions)


		Common Stock
		Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity
		Common Stock

		Common Stock											Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Total Equity
Balance at December 31, 2023
Net earnings
Other comprehensive income, net of tax
Dividends declared
Repurchases of common stock
Stock-based awards, ESOP activity and other
Balance at March 31, 2024

Balance at December 31, 2022
Balance at December 31, 2022
Balance at December 31, 2022	Balance at December 31, 2022	$	254	$	92	$	16,943	$	(8,023)		$	9,266
Net earnings	Net earnings	—		—		1,689		—			1,689
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		—		—		(63)			(63)
Dividends declared	Dividends declared	—		—		(768)		—			(768)
Repurchases of common stock	Repurchases of common stock	(1)		(113)		(386)		—			(500)
Stock-based awards, ESOP activity and other	Stock-based awards, ESOP activity and other	1		21		—		—			22

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

Balance at December 31, 2021		$	271	$	94	$	21,600	$	(11,006)		$	10,959
Net earnings		—		—		1,733		—			1,733
Other comprehensive income, net of tax		—		—		—		27			27
Dividends declared		—		—		(749)		—			(749)
Repurchases of common stock		(6)		(126)		(1,868)		—			(2,000)
Stock-based awards, ESOP activity and other		—		32		—		—			32

Balance at March 27, 2022		$	265	$	—	$	20,716	$	(10,979)		$	10,002
Balance at March 26, 2023
Balance at March 26, 2023

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. Significant estimates inherent in the preparation of our consolidated financial statements include, but are not limited to, accounting for sales and cost recognition; postretirement benefit plans; 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 tax assets; 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.

Effective January 1, 2023, we no longer consider amortization expense related to purchased intangible assets when evaluating the operating performance of our business segments. As a result, intangible asset amortization expense, which was previously included in segment operating profit, is now reported in unallocated corporate expense within total consolidated operating profit. This change has no impact on our consolidated operating results. Management believes this updated presentation better aligns with how the business is viewed and managed and will provide better insights into business segment performance. This change has been applied to the amounts in this Form 10-Q, including amounts for 2022. See “Note 3 - Information on Business Segments” for further information regarding the impact of this change on our current and prior period segment operating profit.

Additionally, during the third quarter of 2022, we changed the presentation of deferred income taxes related to uncertain tax positions in the operating cash flow section of the consolidated statements of cash flows. First quarter of 2022 amounts have been conformed to current period presentation and this change does not impact previously reported net cash from operating activities.

We close our books and records on the last Sunday of the interim calendar quarter, which was on March 31 for the first quarter of 2024 and March 26 for the first quarter of 2023, ~~and March 27, for the first quarter of 2022,~~ 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, ~~2022 (2022~~2023 (2023 Form 10-K).

~~Table of Contents~~

~~Lockheed Martin Corporation~~

~~Notes to Consolidated Financial Statements (unaudited) (continued)~~

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

March 26,
2023

March 27,
2022

Quarters Ended

March 31,
2024

March 26,
2023

Weighted average common shares outstanding for basic computations

254.7

268.3

Weighted average dilutive effect of equity awards

1.0

0.9

Weighted average dilutive effect of equity awards

Weighted average common shares outstanding for diluted computations

255.7

269.2

Weighted average common shares outstanding for diluted computations

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 ended March ~~26, 2023~~31, 2024 and March ~~27, 2022.~~26, 2023. Basic and diluted weighted average common shares outstanding decreased in ~~2023~~2024 compared to ~~2022~~2023 due to share repurchases. See “Note 9 - Stockholders’ Equity” for more information.

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

NOTE 3 - INFORMATION ON BUSINESS SEGMENTS

Overview

We operate in four business segments: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. We organize our business segments based on the nature of products and services offered.

Selected Financial Data by Business Segment

Net sales and operating profit of our business segments exclude intersegment sales, cost of sales and profit as these activities are eliminated in consolidation and thus are not included in management’s evaluation of performance of each segment. Business segment operating profit includes our share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of our business segments.

Summary ~~Operating Results~~

~~As discussed in “Note 1 - Basis of Presentation”, effective January 1, 2023, we no longer consider amortization expense related to purchased intangible assets when evaluating the~~ operating performance of our business segments. As a result, intangible asset amortization expense, which was previously included in segment operating profit, is now reported in unallocated items within total consolidated operating profit.

~~Table of Contents~~

~~Lockheed Martin Corporation~~

~~Notes to Consolidated Financial Statements (unaudited) (continued)~~

~~This change has been applied to the amounts below, including the amounts for 2022. Sales and operating profit~~results for each of our business segments were as follows (in millions):
Quarters Ended
March 26,
2023 March 27,
2022
Net sales
Aeronautics $ 6,269 $ 6,401
Missiles and Fire Control 2,388 2,452
Rotary and Mission Systems 3,510 3,552
Space 2,959 2,559
Total net sales $ 15,126 $ 14,964
Operating profit
Aeronautics $ 675 $ 679
Missiles and Fire Control 377 385
Rotary and Mission Systems 350 406
Space 280 248
Total business segment operating profit 1,682 1,718
Unallocated items
FAS/CAS pension operating adjustment 415 426
Intangible asset amortization expense (62) (62)
Other, net 2 (149)
Total unallocated items 355 215
Total consolidated operating profit $ 2,037 $ 1,933
Intersegment sales
Aeronautics $ 53 $ 60
Missiles and Fire Control 146 156
Rotary and Mission Systems 489 455
Space 86 83
Total intersegment sales $ 774 $ 754


	Quarters Ended
		March 31, 2024			March 26, 2023
Net sales
Aeronautics			$	6,845		$	6,269
Missiles and Fire Control			2,993			2,388
Rotary and Mission Systems			4,088			3,510
Space			3,269			2,959
Total net sales			$	17,195		$	15,126
Operating profit
Aeronautics			$	679		$	675
Missiles and Fire Control			311			377
Rotary and Mission Systems			430			350
Space			325			280
Total business segment operating profit			1,745			1,682
Unallocated items
FAS/CAS pension operating adjustment			406			415

Intangible asset amortization expense			(61)			(62)
Other, net			(61)			2
Total unallocated items			284			355
Total consolidated operating profit			$	2,029		$	2,037
Intersegment sales
Aeronautics			$	70		$	53
Missiles and Fire Control			202			146
Rotary and Mission Systems			586			489
Space			107			86
Total intersegment sales			$	965		$	774

Unallocated Items

Business segment operating profit excludes the FAS/CAS pension operating adjustment, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, ~~environmental costs,~~ stock-based compensation expense, changes in the fair value of ~~net~~ assets and liabilities for deferred compensation plans, retiree benefits, significant severance charges, significant asset impairments, gains or

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

losses from divestitures, intangible asset amortization expense, and other miscellaneous corporate activities. Excluded items are included in the reconciling item “Unallocated items” between operating profit from our business segments and our consolidated operating profit. See “Note 10 - Other” for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments.

FAS/CAS Pension Operating Adjustment

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

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Disaggregation of Net Sales

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


			Quarter Ended March 26, 2023
			Aeronautics		MFC		RMS		Space		Total
		Quarters Ended March 31, 2024														Quarters Ended March 31, 2024
		Aeronautics											Aeronautics	MFC	RMS		Space	Total
Net sales	Net sales
Products
Products
Products	Products		$	5,156	$	2,089	$	2,792	$	2,489	$	12,526
Services	Services		1,113		299		718		470		2,600
Total net sales	Total net sales		$	6,269	$	2,388	$	3,510	$	2,959	$	15,126
Net sales by contract type	Net sales by contract type
Fixed-price	Fixed-price		$	4,312	$	1,618	$	2,208	$	764	$	8,902
Fixed-price
Fixed-price
Cost-reimbursable	Cost-reimbursable		1,957		770		1,302		2,195		6,224
Total net sales	Total net sales		$	6,269	$	2,388	$	3,510	$	2,959	$	15,126
Net sales by customer	Net sales by customer
U.S. Government
U.S. Government
U.S. Government	U.S. Government		$	4,117	$	1,581	$	2,423	$	2,908	$	11,029
International (a)	International (a)		2,114		805		1,020		45		3,984
U.S. commercial and other	U.S. commercial and other		38		2		67		6		113
Total net sales	Total net sales		$	6,269	$	2,388	$	3,510	$	2,959	$	15,126
Net sales by geographic region	Net sales by geographic region
United States
United States
United States	United States		$	4,155	$	1,583	$	2,490	$	2,914	$	11,142
Europe	Europe		1,130		211		225		23		1,589
Asia Pacific	Asia Pacific		675		102		438		22		1,237
Middle East	Middle East		225		455		186		—		866
Other	Other		84		37		171		—		292
Total net sales	Total net sales		$	6,269	$	2,388	$	3,510	$	2,959	$	15,126


			Quarter Ended March 27, 2022
			Aeronautics		MFC		RMS		Space		Total
		Quarter Ended March 26, 2023														Quarter Ended March 26, 2023
		Aeronautics											Aeronautics	MFC	RMS		Space	Total
Net sales	Net sales
Products
Products
Products	Products		$	5,417	$	2,173	$	2,788	$	2,116	$	12,494
Services	Services		984		279		764		443		2,470
Total net sales	Total net sales		$	6,401	$	2,452	$	3,552	$	2,559	$	14,964
Net sales by contract type	Net sales by contract type
Fixed-price	Fixed-price		$	4,686	$	1,713	$	2,218	$	637	$	9,254
Fixed-price
Fixed-price
Cost-reimbursable	Cost-reimbursable		1,715		739		1,334		1,922		5,710
Total net sales	Total net sales		$	6,401	$	2,452	$	3,552	$	2,559	$	14,964
Net sales by customer	Net sales by customer
U.S. Government
U.S. Government
U.S. Government	U.S. Government		$	4,213	$	1,595	$	2,511	$	2,516	$	10,835
International (a)	International (a)		2,150		852		971		34		4,007
U.S. commercial and other	U.S. commercial and other		38		5		70		9		122
Total net sales	Total net sales		$	6,401	$	2,452	$	3,552	$	2,559	$	14,964
Net sales by geographic region	Net sales by geographic region
United States
United States
United States	United States		$	4,251	$	1,600	$	2,581	$	2,525	$	10,957
Europe	Europe		1,023		256		187		24		1,490
Asia Pacific	Asia Pacific		721		106		432		7		1,266
Middle East	Middle East		262		465		176		3		906
Other	Other		144		25		176		—		345
Total net sales	Total net sales		$	6,401	$	2,452	$	3,552	$	2,559	$	14,964

(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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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Our Aeronautics business segment includes our largest program, the F-35 Lightning II, an international multi-role, multi-variant, stealth fighter aircraft. Net sales for the F-35 program represented approximately 25% of our total consolidated net sales for the quarter ended March 31, 2024 and 26% of our total consolidated net sales for the quarter ended March 26, ~~2023 and 29% of our total consolidated net sales for the quarter ended March 27, 2022.~~2023.

Assets

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

March 26,
2023

December 31,
2022

March 31,
2024

December 31,
2023

Assets

Aeronautics

13,247

12,055

Aeronautics

Missiles and Fire Control

5,630

5,788

Rotary and Mission Systems

17,923

17,988

Rotary and Mission Systems

Space

6,471

6,351

Total business segment assets

43,271

42,182

Total business segment assets

Corporate assets (a)

11,351

10,698

Total assets

54,622

52,880

Total assets

(a)Corporate assets primarily include cash and cash equivalents, deferred income taxes, assets for the portion of environmental costs that are probable of future recovery, property, plant and equipment used in our corporate operations, assets held in a trust for deferred compensation plans, and ~~other marketable investments.~~investments in early-stage companies.

NOTE 4 - CONTRACT ASSETS AND LIABILITIES

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. Contract liabilities include advance payments and billings in excess of revenue recognized. Contract assets and contract liabilities were as follows (in millions):

March 26,
2023

December 31,
2022

March 31,
2024

December 31,
2023

Contract assets

13,189

12,318

Contract liabilities

8,336

8,488

Contract liabilities

Contract assets increased ~~$871~~$867 million during the quarter ended March ~~26, 2023,~~31, 2024, due to the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations during the quarter ended March ~~26, 2023~~31, 2024 for which we have not yet billed our ~~customers (primarily on the F-35 program at Aeronautics).~~customers. There were no significant credit or impairment losses related to our contract assets during the quarters ended March ~~26, 2023~~31, 2024 and March ~~27, 2022.~~26, 2023.

Contract liabilities decreased ~~$152~~$445 million during the quarter ended March ~~26, 2023,~~31, 2024, primarily due to revenue recognized in excess of payments received on these performance obligations. During the quarter ended March 31, 2024, we recognized $2.4 billion of our contract liabilities at December 31, 2023 as revenue. During the quarter ended March 26, 2023, we recognized $2.2 billion of our contract liabilities at December 31, 2022 ~~as revenue. During the quarter ended March 27, 2022, we recognized $2.1 billion of our contract liabilities at December 31, 2021~~ as revenue.

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

NOTE 5 -INVENTORIES

Inventories consisted of the following (in millions):

March 26,
2023

December 31,
2022

March 31,
2024

December 31,
2023

Materials, spares and supplies

601

599

Work-in-process

2,681

2,297

Work-in-process

Finished goods

189

192

Total inventories

3,471

3,088

Total inventories

Costs incurred to fulfill a contract in advance of the contract being awarded are included in inventories as work-in-process if we determine that those costs relate directly to a contract or to an anticipated contract that we can specifically identify and determine that contract award is probable, the costs generate or enhance resources that will be used in satisfying performance obligations, and the costs are recoverable (referred to as pre-contract costs). These advanced procurement costs are generally incurred in order to enhance our ability to achieve schedule and certain customer milestones. Pre-contract costs that are initially capitalized in inventory are generally recognized as cost of sales consistent with the transfer of products and services to the customer upon the receipt of the anticipated contract. All other pre-contract costs, including start-up costs, are expensed as incurred. As of March ~~26, 2023~~31, 2024 and December 31, ~~2022, $980 million~~2023, $1.1 billion and ~~$791~~$989 million of pre-contract costs ~~were included in inventories. The increase in pre-contract costs as of March 26, 2023 is primarily driven by our Aeronautics business segment~~ (primarily the F-35 program and classified ~~contracts).~~contracts at our Aeronautics business segment) were included in inventories.

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Notes to Consolidated Financial Statements (unaudited) (continued)

NOTE 6 - POSTRETIREMENT BENEFIT PLANS

FAS income

The pretax FAS income related to our qualified defined benefit pension plans and retiree medical and life insurance plans consisted of the following (in millions):
Quarters Ended
March 26,
2023 March 27,
2022
Qualified defined benefit pension plans
Operating:
Service cost $ (16) $ (24)
Non-operating:
Interest cost (365) (302)
Expected return on plan assets 430 502
Recognized net actuarial losses (42) (150)
Amortization of prior service credits 87 90
Non-service FAS pension income 110 140
Total FAS pension income $ 94 $ 116
Retiree medical and life insurance plans
Operating:
Service cost $ (1) $ (2)
Non-operating:
Interest cost (17) (12)
Expected return on plan assets 26 34
Recognized net actuarial gains 8 11
Amortization of prior service costs (3) (7)
Non-service FAS retiree medical and life income 14 26
Total FAS retiree medical and life income $ 13 $ 24

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~~Notes to Consolidated Financial Statements (unaudited) (continued)~~



	Quarters Ended
		March 31, 2024			March 26, 2023
Qualified defined benefit pension plans
Operating:
Service cost			$	(15)		$	(16)
Non-operating:
Interest cost			(349)			(365)
Expected return on plan assets			393			430
Amortization of actuarial losses			(65)			(42)
Amortization of prior service credits			37			87

Non-service FAS pension income			16			110
Total FAS pension income			$	1		$	94
Retiree medical and life insurance plans
Operating:
Service cost			$	(1)		$	(1)
Non-operating:
Interest cost			(16)			(17)
Expected return on plan assets			27			26
Amortization of actuarial gains			9			8
Amortization of prior service costs			(1)			(3)
Non-service FAS retiree medical and life income			19			14
Total FAS retiree medical and life income			$	18		$	13

We record the service cost component of FAS income for our qualified defined benefit pension plans and retiree medical and life insurance plans in the cost of sales accounts; the non-service components of our FAS income for our qualified defined benefit pension plans in the non-service FAS pension income account; and the non-service components of our FAS income for our retiree medical and life insurance plans as part of the other non-operating income, net account on our consolidated statements of earnings.

The ~~recognized~~amortization of net actuarial losses or gains and ~~amortization of~~ prior service credits or costs in the table above, along with similar costs related to our other postretirement benefit plans ($34 million for the quarter ended March 31, 2024 and $3 million for the quarter ended March 26, ~~2023 and $5 million for the quarter ended March 27, 2022)~~2023) were reclassified from accumulated other comprehensive loss (AOCL) and recorded as a component of FAS income for the periods presented. These costs totaled $24 million, ($19 million, net of tax) during the quarter ended March 31, 2024, and $(47) million ($(37) million, net of tax) during the quarter ended March 26, ~~2023, and $61 million ($48 million, net of tax) during the quarter ended March 27, 2022.~~2023.

Funding ~~requirements~~Requirements

The required funding of our qualified defined benefit pension plans is determined in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), as amended, along with consideration of CAS and Internal Revenue Code rules. We made no contributions to our qualified defined benefit pension plans during the quarters ended March ~~26, 2023~~31, 2024 and March ~~27, 2022.~~26, 2023.

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

NOTE 7 - LEGAL PROCEEDINGS AND CONTINGENCIES

Legal Proceedings

We are a party to litigation and other proceedings that arise in the ordinary course of our business, including matters arising under provisions 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 believe the probability is remote that the outcome of each of these matters, including the legal proceedings described below, will have a material adverse effect on the company as a whole, notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings and cash flows in any particular interim reporting period. Among the factors that we consider in this assessment are the nature of existing legal proceedings and claims, the asserted or possible damages or loss contingency (if estimable), the progress of the case, existing law and precedent, the opinions or views of legal counsel and other advisers, our experience in similar cases and the experience of other companies, the facts available to us at the time of assessment and how we intend to respond to the proceeding or claim. Our assessment of these factors may change over time as individual proceedings or claims progress.

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 have been 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, a reasonably possible loss or range of loss associated with any individual legal proceeding cannot be estimated.

United States of America, ex rel. Patzer; Cimma v. Sikorsky Aircraft Corp., et al.

As a result of our acquisition of Sikorsky Aircraft Corporation (Sikorsky), we assumed the defense of and any potential liability for two civil False Claims Act lawsuits pending in the U.S. District Court for the Eastern District of Wisconsin. In October 2014, the U.S. Government filed a complaint in intervention in the first suit, which was brought by qui tam relator Mary Patzer, a former Derco Aerospace (Derco) employee. In May 2017, the U.S. Government filed a complaint in intervention in a second suit, which was brought by qui tam relator Peter Cimma, a former Sikorsky Support Services, Inc. (SSSI) employee. In November 2017, the Court consolidated the cases into a single action for discovery and trial.

The U.S. Government alleges that Sikorsky and two of its wholly-owned subsidiaries, Derco and SSSI, violated the civil False Claims Act and the Truth in Negotiations Act in connection with a contract the U.S. Navy awarded to SSSI in June 2006 to support the Navy’s T-34 and T-44 fixed-wing turboprop training aircraft. SSSI subcontracted with Derco,

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~~Notes to Consolidated Financial Statements (unaudited) (continued)~~

primarily to procure and manage spare parts for the training aircraft. The U.S. Government contends that SSSI overbilled the Navy on the contract as the result of Derco’s use of prohibited cost-plus-percentage-of-cost (CPPC) pricing to add profit and overhead costs as a percentage of the price of the spare parts that Derco procured and then sold to SSSI. The U.S. Government also alleges that Derco’s claims to SSSI, SSSI’s claims to the Navy, and SSSI’s yearly Certificates of Final Indirect Costs from 2006 through 2012 were false and that SSSI submitted inaccurate cost or pricing data in violation of the Truth in Negotiations Act for a sole-sourced, follow-on “bridge” contract. The U.S. Government’s complaints assert common law claims for breach of contract and unjust enrichment. On November 29, 2021, the District Court granted the U.S. Government’s motion for partial summary judgment, finding that the Derco-SSSI agreement was a CPPC contract. On October 17, 2023, the District Court ruled on the parties’ cross motions for summary judgment, granting some motions and denying others. Trial on the U.S. Government’s remaining claims is scheduled for May 6, 2024.

We believe that we have legal and factual defenses to the U.S. Government’s remaining claims. The U.S. Government seeks damages of approximately $52 million, subject to trebling, plus statutory penalties. Although we continue to evaluate our liability and exposure, we do not currently believe that it is probable that we will incur a material loss. If, contrary to our expectations, the U.S. Government prevails on the remaining issues in this matter and proves damages at or near $52 million and is successful in having such damages trebled, the outcome could have an adverse effect on our results of operations in the period in which a liability is recognized and on our cash flows for the period in which any damages are paid.

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Notes to Consolidated Financial Statements (unaudited) (continued)

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 (IS&GS) business, we retained responsibility for the litigation when we divested IS&GS in 2016.

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, facilities for which we may have contractual responsibility, and at third-party sites where we have been designated as a potentially responsible party (PRP). A substantial portion of environmental costs will be included in our net sales and cost of sales in future periods pursuant to U.S. Government regulations. At the time a liability is recorded for future environmental costs, we record assets for estimated future recovery considered probable through the pricing of products and services to agencies of the U.S. Government, regardless of the contract form (e.g., cost-reimbursable, fixed-price). We continually evaluate the recoverability of our assets for the portion of environmental costs that are probable of future recovery by assessing, among other factors, U.S. Government regulations, our U.S. Government business base and contract mix, and our history of receiving reimbursement of such costs. We include the portions of those environmental costs expected to be allocated to our non-U.S. ~~Government~~government contracts, or determined not to be recoverable under U.S. Government contracts, in our cost of sales at the time the liability is established or adjusted.

At March ~~26, 2023~~31, 2024 and December 31, ~~2022,~~2023, the aggregate amount of liabilities recorded relative to environmental matters was ~~$690~~$677 million and ~~$696~~$680 million, most of which are recorded in other noncurrent liabilities on our consolidated balance sheets. We have recorded assets for the portion of environmental costs that are probable of future recovery totaling ~~$612~~$611 million and ~~$618~~$613 million at March ~~26, 2023~~31, 2024 and December 31, ~~2022,~~2023, most of which are recorded in other noncurrent assets on our consolidated balance sheets.

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~~Notes to Consolidated Financial Statements (unaudited) (continued)~~

Environmental remediation activities usually span many years, which makes estimating liabilities a matter of judgment because of uncertainties with respect to assessing the extent of the contamination as well as such factors as changing remediation technologies and changing regulatory environmental standards. We are monitoring or investigating a number of former and present operating facilities for potential future remediation. We perform quarterly reviews of the status of our environmental remediation sites and the related liabilities and receivables. Additionally, in our quarterly reviews, we consider these and other factors in estimating the timing and amount of any future costs that may be required for remediation activities, and we record a liability when it is probable that a loss has occurred or will occur for a particular site and the loss can be reasonably estimated. The amount of liability recorded is based on our estimate of the costs to be incurred for remediation for that site. We do not discount the recorded liabilities, as the amount and timing of future cash payments are not fixed or cannot be reliably determined. We cannot reasonably determine the extent of our financial exposure in all cases as, although a loss may be probable or reasonably possible, in some cases it is not possible at this time to estimate the reasonably possible loss or range of loss. We project costs and recovery of costs over approximately 20 years.

We also pursue claims for recovery of costs incurred or for contribution to site remediation costs against other PRPs, including the U.S. Government, and are conducting remediation activities under various consent decrees, orders, and agreements relating to soil, groundwater, sediment, or surface water contamination at certain sites of former or current

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Notes to Consolidated Financial Statements (unaudited) (continued)

operations. Under agreements related to certain sites in California, New York, United States Virgin Islands and Washington, the U.S. Government and/or a private party reimburses us an amount equal to a percentage, specific to each site, of expenditures for certain remediation activities in their capacity as PRPs under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).

In addition to the proceedings and potential proceedings discussed above, potential new regulations ofconcerning perchlorate and hexavalent chromium at the federal and state level could adversely affect us. In particular, the U.S. Environmental Protection Agency (EPA) is considering whether to regulate hexavalent chromium at the federal level and the California State Water Resources Control Board continues to reevaluate its existing drinking water standard of 6 ppb for perchlorate.

increase our cleanup costs. If substantially lower cleanup standards are adopted for perchlorate ~~in California~~ or for hexavalent chromium, ~~at the federal level,~~ we expect a material increase in both our estimates for environmental liabilities and the related assets for the portion of ~~the increased~~ costs that are probable of future ~~recovery in the pricing of our products and services for the U.S. Government.~~recovery. The amount that would be allocable to our non-U.S. ~~Government~~government contracts or that is determined not to be recoverable under U.S. Government contracts would be expensed, which may have a material effect on our earnings in any particular interim reporting period.

We also are evaluating the potential impact of new, existing, and contemplated ~~legal~~ requirements addressing a class of chemicals known generally as per- and polyfluoroalkyl substances (PFAS). PFAS ~~have been used ubiquitously,~~are common and appear in products such as in fire-fighting foams ~~manufacturing processes,~~ and stain- and stick-resistant products (e.g., Teflon, stain-resistant fabrics)~~. Because we~~ and have been used products and processes over the years containing some of those compounds, they likely exist as contaminants at many of our environmental remediation sites. Governmental authorities have announced plans, and in ~~some instances have begun, to regulate certain of these compounds at extremely~~manufacturing processes. Regulations requiring very low ~~concentrations~~PFAS contaminant levels in drinking water ~~which~~ could eventually lead to increased cleanup costs at ~~many~~a number of our environmental remediation sites.

Letters of Credit, Surety Bonds and Third-Party Guarantees

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 ~~$2.8~~$2.7 billion and $2.9 billion at March ~~26, 2023~~31, 2024 and December 31, ~~2022.~~2023.

Additionally, we may guarantee the contractual performance of third parties such as joint venture partners. At March ~~26, 2023~~31, 2024 and December 31, ~~2022,~~2023, third-party guarantees totaled ~~$908~~$364 million and ~~$904 million,~~$1.0 billion, of which approximately ~~72%~~29% and ~~71%~~75% related to guarantees of contractual performance of joint ventures to which we currently are or previously were a party. These amounts represent our estimate of the maximum amounts we would expect to incur upon the contractual non-performance of the joint venture, joint venture partners or divested businesses. Generally, we also have cross-indemnities in place that may enable us to recover amounts that may be paid on behalf of a joint venture partner. Third-party guarantees do not include guarantees issued on behalf of subsidiaries and other consolidated entities.

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~~Notes to Consolidated Financial Statements (unaudited) (continued)~~

In determining our exposures, we evaluate the reputation, performance on contractual obligations, technical capabilities and credit quality of our current and former joint venture partners and the transferee under novation agreements all of which include a guarantee as required by the FAR. At March ~~26, 2023~~31, 2024 and December 31, ~~2022,~~2023, there were no material amounts recorded in our financial statements related to third-party guarantees or novation agreements.

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 government contracts or conducted for other reasons, could result in administrative, civil, or criminal liabilities, including repayments, fines or penalties being imposed upon us, suspension, proposed debarment, debarment from eligibility for future U.S. Government contracting, or suspension of export privileges. Suspension or debarment could have a material adverse effect on us because of our dependence on contracts with the U.S. 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 U.S., 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.

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

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Notes to Consolidated Financial Statements (unaudited) (continued)

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

NOTE 8 - FAIR VALUE MEASUREMENTS

Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following (in millions):


			March 26, 2023								December 31, 2022
			Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
			March 31, 2024
			March 31, 2024
			March 31, 2024																		December 31, 2023
		Total																	Total	Level 1		Level 2	Level 3	Total	Level 1	Level 2	Level 3
Assets	Assets
Mutual funds
Mutual funds
Mutual funds	Mutual funds		$	893	$	893	$	—	$	—	$	897	$	897	$	—	$	—
U.S. Government securities	U.S. Government securities		115		—		115		—		118		—		118		—
Other securities	Other securities		665		322		282		61		660		333		264		63
Derivatives	Derivatives		11		—		11		—		18		—		18		—
Liabilities	Liabilities
Derivatives	Derivatives		164		—		164		—		196		—		196		—
Derivatives
Derivatives

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 do not enter into or hold derivative instruments for speculative trading purposes. We transact business globally and are subject to risks associated with changing foreign currency exchange rates. We enter into foreign currency hedges such as forward and option contracts that change in value as foreign currency exchange rates change. Our most significant foreign currency exposures relate to the British pound sterling, the euro, the Canadian dollar, the Australian dollar, the Norwegian kroner and the Polish zloty. These contracts hedge forecasted

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~~Notes to Consolidated Financial Statements (unaudited) (continued)~~

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 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.

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Notes to Consolidated Financial Statements (unaudited) (continued)

The aggregate notional amount of our outstanding interest rate swaps was $1.3 billion at both March ~~26, 2023~~31, 2024 and December 31, ~~2022.~~2023. The aggregate notional amount of our outstanding foreign currency hedges was ~~$7.4~~$6.2 billion and ~~$7.3~~$6.5 billion at March ~~26, 2023~~31, 2024 and December 31, ~~2022.~~2023. The fair values of our outstanding interest rate swaps and foreign currency hedges at March ~~26, 2023~~31, 2024 and December 31, ~~2022~~2023 were not significant. Derivative instruments did not have a material impact on net earnings and comprehensive income during the quarters ended March ~~26, 2023~~31, 2024 and March ~~27, 2022.~~26, 2023. The impact of derivative instruments on our consolidated statements of cash flows is included in net cash provided by operating activities. Substantially all of our derivatives are designated for hedge accounting.

We also make investments in ~~certain~~early-stage companies that we believe are advancing or developing new technologies applicable to our business. Investments that have quoted market prices in active markets (Level 1) are recorded at fair value and reflected in other securities ~~and~~while certain investments are categorized as Level 3 when valuations using observable inputs are unavailable. See “Note 10 - Other - Investments” for more information.

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 ~~$16.5~~$19.9 billion and ~~$16.0~~$18.5 billion at March ~~26, 2023~~31, 2024 and December 31, ~~2022.~~2023. The outstanding principal amount of debt, including short-term and long-term debt, was ~~$16.8~~$20.7 billion and $18.7 billion at ~~both~~ March ~~26, 2023~~31, 2024 and December 31, ~~2022,~~2023, excluding ~~$1.2 billion and~~ $1.3 billion of unamortized discounts and issuance costs at both March ~~26, 2023~~31, 2024 and December 31, ~~2022.~~2023. The estimated fair values of our outstanding debt were determined based on the present value of future cash flows using model-derived valuations that use observable inputs such as interest rates and credit spreads (Level 2).

NOTE 9 - STOCKHOLDERS’ EQUITY

Repurchases of Common Stock

During the quarter ended March ~~26, 2023,~~31, 2024, we ~~entered into an accelerated share repurchase (ASR) agreement to~~

purchase $500 million of our common stock. Under the terms of the ASR agreement, we paid $500 million and received an initial delivery of 0.9 million shares of our common stock. Subsequent to our first quarter 2023, upon final settlement of the ASR agreement in April 2023, we received an additional 0.2repurchased 2.3 million shares of our common stock for ~~no additional consideration. In addition,~~$1.0 billion in ~~April 2023, we received an additional 1.5 million shares of our common stock for no additional consideration upon final settlement of the ASR we entered into in the fourth quarter of 2022.~~

open market purchases. The total remaining authorization for future common ~~share~~stock repurchases under our share repurchase program was ~~$9.5~~$9.0 billion as of March ~~26, 2023.~~31, 2024. As we repurchase our common shares, we reduce common stock for the $1 of par value of the shares repurchased, with the excess purchase price over par value recorded as a reduction of additional paid-in capital. If additional paid-in capital is reduced to zero, we record the remainder of the excess purchase price over par value as a reduction of retained earnings.

Dividends

We declared cash dividends totaling ~~$768~~$763 million ($~~3.00~~3.15 per share) during the quarter ended March ~~26, 2023.~~31, 2024. 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.

1819

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Notes to Consolidated Financial Statements (unaudited) (continued)

Accumulated Other Comprehensive Loss

Changes in the balance of AOCL, net of tax, consisted of the following (in millions):


		Postretirement Benefit Plans		Other, net		AOCL
Balance at December 31, 2022		$	(7,866)	$	(157)	$	(8,023)
		Postretirement Benefit Plans
		Postretirement Benefit Plans
		Postretirement Benefit Plans						Other, net	AOCL
Balance at December 31, 2023
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	—		(29)		(29)

Amounts reclassified from AOCL	Amounts reclassified from AOCL
Amounts reclassified from AOCL
Amounts reclassified from AOCL

Recognition of net actuarial losses (a)		29		—		29
Amortization of net actuarial losses (a)

Amortization of net actuarial losses (a)

Amortization of net actuarial losses (a)
Amortization of net prior service credits (a)
Other
Total reclassified from AOCL
Total other comprehensive income (loss)
Balance at March 31, 2024

Balance at December 31, 2022
Balance at December 31, 2022
Balance at December 31, 2022
Other comprehensive income (loss) before reclassifications
Amounts reclassified from AOCL

Amortization of net actuarial losses (a)

Amortization of net actuarial losses (a)

Amortization of net actuarial losses (a)
Amortization of net prior service credits (a)	Amortization of net prior service credits (a)	(66)		—		(66)
Other	Other	—		3		3
Total reclassified from AOCL	Total reclassified from AOCL	(37)		3		(34)
Total other comprehensive income (loss)	Total other comprehensive income (loss)	(37)		(26)		(63)
Balance at March 26, 2023	Balance at March 26, 2023	$	(7,903)	$	(183)	$	(8,086)

Balance at December 31, 2021		$	(10,964)	$	(42)	$	(11,006)
Other comprehensive income (loss) before reclassifications		—		(22)		(22)
Amounts reclassified from AOCL

Recognition of net actuarial losses (a)		115		—		115
Amortization of net prior service credits (a)		(67)		—		(67)
Other		—		1		1
Total reclassified from AOCL		48		1		49
Total other comprehensive income (loss)		48		(21)		27
Balance at March 27, 2022		$	(10,916)	$	(63)	$	(10,979)

(a)Reclassifications from AOCL related to postretirement benefit plans were recorded as a component of FAS income for each period presented. See “Note 6 - Postretirement Benefit Plans”.

NOTE 10 - OTHER

Contract Estimates

Significant estimates and assumptions are made in estimating contract sales, costs, and profit. We estimate profit as the difference between estimated revenues and total estimated costs to complete the contract. 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., material, labor, subcontractor, overhead, general and administrative 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. Profit booking rates may increase during the performance of the contract if we successfully retire risks related to technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract or may increase the variable consideration we expect to receive on the contract. Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase or our estimates of variable consideration we expect to receive decrease. All of the estimates are subject to change during the performance of the contract and may affect the profit booking rate. 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.

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

~~Table of Contents~~

~~Lockheed Martin Corporation~~

~~Notes to Consolidated Financial Statements (unaudited) (continued)~~

profit booking rate adjustments, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate and are typically referred to as unfavorable profit booking rate adjustments. Increases or decreases in profit booking rates are recognized in the current period they are determined and reflect the inception-to-date effect of such changes. Segment operating profit and margin ~~may also~~can be impacted favorably or unfavorably by, ~~other~~for example, certain items listed below, which may or may not impact sales. Favorable items ~~may~~ include the positive resolution of contractual matters, cost recoveries on severance and restructuring, insurance recoveries and gains on sales of assets. Unfavorable items ~~may~~ include the adverse resolution of contractual matters; ~~COVID-19 impacts or~~ supply chain disruptions; restructuring charges (except for significant severance actions, which are excluded from segment operating results); reserves for disputes; certain asset impairments; and losses on sales of certain assets.

Our consolidated net profit booking rate adjustments increased ~~segment operating profit~~sales by ~~approximately $415~~$272 million during the quarter ended March ~~26, 2023~~31, 2024 and $405 million during the quarter ended March 27, 2022. These adjustments increased net earnings by approximately $328 million ($1.28 per share) during the quarter ended March 26, 2023 and $320 million ($1.19 per share) during the quarter ended March 27, 2022. We recognized net sales from performance obligations satisfied in prior periods of approximately $433 million during the quarter ended March 26, ~~2023, and $416~~2023. These adjustments increased segment operating profit by approximately $195 million ($154 million, or $0.64 per share, after tax) during the quarter ended March ~~27, 2022, which primarily relate~~31, 2024, and $415 million ($328 million, or $1.28 per share, after tax) during the quarter ended March 26, 2023. The impact to ~~changes in~~2024 segment operating profit ~~booking rates that impacted revenue.~~includes a reach-forward loss of $100 million recognized on a classified program at our MFC business segment described below.

We have various development programs for new and upgraded products, services, and related technologies which have complex design and technical challenges. This development work is inherently uncertain and subject to significant variability in estimates of the cost and time required to complete the work by us and our suppliers. Many of these programs have cost-type contracting arrangements (e.g. cost-reimbursable or cost-plus-fee). In such cases, the associated financial risks are primarily in reduced fees, lower profit rates, or program cancellation if cost, schedule, or technical performance issues arise.

However, some of our existing development programs are contracted on a fixed-price basis or include cost-type contracting for the development phase with fixed-price production options and our customers are increasingly implementing procurement policies such as these that shift risk to contractors. 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, cash flows, or financial condition. Any such losses are recorded in the period in which the loss is evident.

We have experienced performance issues on a classified fixed-price incentive fee contract that involves highly complex design and systems integration at our Aeronautics business segment and have periodically recognized reach-forward losses. As of March 31, 2024, we recognized additional losses of $20 million related to technical challenges that have resulted in schedule delays and higher than anticipated costs bringing cumulative losses to approximately $290 million. We will continue to monitor the technical requirements and our performance, the remaining work ~~schedule,~~ and estimated costs to complete the program. Based the revised schedule, which was agreed to in 2021, cumulative losses were approximately $270 million as of March 26, 2023. We will continue to monitor our performance, any future changes in scope or schedule, and estimated costs to complete the program and may have to record additional losses in future periods if we experience further performance issues, increases in scope, or cost growth, which could be material to our financial results. In addition, we and our industry team will continue to incur advanced procurement costs (also referred to as pre-contract costs) in order to enhance our ability to achieve the ~~revised~~ schedule and certain milestones. We will monitor the recoverability of pre-contract costs, which could be impacted by the customer’s decision regarding future phases of the program.

We are responsible for a program to design, develop and construct a ground-based radar at our RMS business segment. The program ~~has~~previously experienced performance issues for which we have periodically recognized reach-forward losses. AsDuring the first quarter of ~~March 26, 2023, cumulative losses were approximately $280 million. We will continue to monitor our performance, any future changes in scope,~~2024, we delivered and ~~estimated costs to complete~~ the ~~program and may have to record additional losses in future periods if we experience further performance issues, increases in scope, or cost growth.~~customer accepted the radar, which retired the

2021

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

~~However, based~~technical risk on the production scope at less than anticipated cost. As a result, we reduced the cumulative losses ~~previously recorded and our current estimate of the sales and costs to complete~~on the program ~~at this time we do not anticipate~~by $20 million to approximately $260 million as of March 31, 2024 and determined that additional losses ifwill not be incurred as the production scope of work is winding down.

We have contracted with the Canadian Government for the Canadian Maritime Helicopter Program (CMHP) at our RMS business segment that provides for design, development, and production of CH-148 aircraft (the Original Equipment contract), which is a military variant of the S-92 helicopter, and for logistical support to the fleet (the In Service Support contract) over an extended time period. We are currently in discussions with the Canadian Government to potentially restructure certain contractual terms and conditions that may be beneficial to both parties. The program has experienced performance issues, including delays in the final aircraft deliveries from the original contract requirement, and the Royal Canadian Air Force’s flight hours have been significantly less than originally anticipated, which has impacted program revenues and the recovery of our costs under this program. We have incurred significant costs and recognized the related sales, of which about $970 million are currently included in contract assets on the balance sheet which could become at risk for future recovery. Such assets are recovered based on flight hours. Future sales and recovery of costs under the program are highly dependent upon achieving a certain number of flight hours, which are not entirely in our control and dependent on aircraft availability and performance, the availability of Canadian government resources, and potential restructured contract terms and conditions to better align with the current needs of the Canadian government and allow for cost recovery. As of March 31, 2024, cumulative losses remained at approximately $100 million. Future performance issues, lower than forecast flight hours, or changes in our estimates due to the outcome of any ~~would~~restructuring discussions may further affect our ability to recover our costs, including recovery of the contract assets recognized on the balance sheet and our assessment of the reach-forward loss, which could be material to our operating results.

We also have a number of contracts with Türkish industry for the Türkish Utility Helicopter Program (TUHP), which anticipates co-production with Türkish industry for production of T70 helicopters for use in Türkiye, as well as the related provision of Türkish goods and services under buy-back or offset obligations, to include the future sales of helicopters built in Türkiye for sale globally. In 2020, the U.S. Government imposed certain sanctions on Türkish entities and persons that have affected our ability to perform under the TUHP contracts and we have provided force majeure notices under the affected contracts. As of March 31, 2024, cumulative losses related to development work for the program remained insignificant and the program remains in a contract liability position on the balance sheet. The TUHP contracts may be negotiated to be restructured or terminated, either in whole or in part and as a result, we could be at risk of recording significant reach-forward losses in future periods. Additionally, we could elect to pursue other relief or remedies, which could result in a further reduction in sales, the imposition of penalties or assessment of damages, and increased unrecoverable costs, which could be material to our financial ~~results~~results.

Our MFC business segment was previously awarded 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. The options for additional phases may be exercised over the next several years and if performed we expect they would each be at a loss. During the first quarter of 2024, we updated our assessment of the likelihood that the options may be exercised and concluded it was probable that an option would be exercised based on progress made on the program and discussions with the customer. Accordingly, in the first quarter of 2024 we recognized a reach forward loss of approximately $100 million, bringing the cumulative losses recognized on the program to approximately $150 million, including charges for precontract costs recognized in prior periods. We will continue to assess the likelihood that additional options will be exercised, utilizing factors such as our performance, future requirements of the program, discussions with the customer and suppliers, customer funding, experience with other customer programs, among other factors. We will be required to recognize additional losses for the remaining options if they become probable of being exercised. The potential total loss across the additional options is up to approximately $1.3 billion. The ultimate amount of additional loss recognized, if any, will depend on how many of the additional options are exercised or ~~financial condition.~~become probable of being exercised.

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

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

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 March ~~26, 2023,~~31, 2024, our ending backlog was ~~$145.1~~$159.4 billion. We expect to recognize approximately ~~36%~~38% of our backlog over the next 12 months and approximately ~~59%~~62% over the next 24 months as revenue with the remainder recognized thereafter.

Income Taxes

Our effective income tax ~~rate was~~rates were 15.8% and 15.3% for the ~~quarter~~quarters ended March 31, 2024 and March 26, ~~2023 and 15.9% for the quarter ended March 27, 2022.~~2023. The rates for ~~both~~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.~~The rate for the first quarter of 2023 was lower than the~~ ~~first~~ ~~quarter of 2022 primarily due to increased research and development tax credits.~~

As of December 31, 2022, our liabilities associated with uncertain tax positions were $1.6 billion. For the quarter ended March 26, 2023, our liabilities associated with uncertain tax positions increased to $1.9 billion with a corresponding increase to net deferred tax assets resulting from the Tax Cuts and Jobs Act of 2017’s elimination of the option for taxpayers to deduct research and development expenditures immediately in the year incurred and instead requiring taxpayers to amortize such expenditures over five years.

Investments

We make investments in ~~certain~~ 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, or investments in ~~funds.~~funds or equity method investments. Most of ~~the~~these investments are in equity securities without readily determinable fair values (privately held securities), which are measured initially at cost and are then adjusted to fair value only if there is an observable price change or reduced for impairment, if applicable. Investments with quoted market prices in active markets (Level 1) (publicly held securities) are recorded at fair value. Certain investments are categorized as Level 3 when valuations using observable inputs are unavailable. The carrying amounts of the ~~Level 1~~ investments were ~~$606~~$597 million and ~~$589~~$581 million at March ~~26, 2023~~31, 2024 and December 31, ~~2022.~~2023. Due to changes in fair value and/or sales of investments, we recorded net gains of $5 million ($4 million, or $0.02 per share, after-tax) during the quarter ended March 31, 2024 and net gains of $29 million ($22 million, or $0.09 per share, after-tax) ~~and $103 million ($77 million, or $0.29 per share, after-tax)~~ during the ~~quarters~~quarter ended March 26, ~~2023 and~~ ~~March 27, 2022~~.2023. These gains ~~and losses~~ are reflected in the other non-operating income, net account on our consolidated statements of earnings.

Debt Issuance

On January 29, 2024, we issued a total of $2.0 billion of senior unsecured notes, consisting of $650 million aggregate principal amount of 4.50% Notes due 2029 (the “2029 Notes”), $600 million aggregate principal amount of 4.80% Notes due 2034 (the “2034 Notes”) and $750 million aggregate principal amount of 5.20% Notes due 2064 (the “2064 Notes” and, together with the 2029 Notes and 2034 Notes, the “Notes”). Net proceeds of $1.98 billion were received from the offering after deducting pricing discounts and debt issuance costs, which are being amortized and recorded as interest expense over the term of the Notes. We will pay interest on the Notes semi-annually in arrears on February 15 and August 15 of each year with the first payment to be made on August 15, 2024. We may, at our option, redeem the Notes of any series in whole or in part at any time and from time to time at a redemption price equal to the greater of 100% of the principal amount of the Notes to be redeemed or an applicable make-whole amount, plus accrued and unpaid interest to the date of redemption. The Notes rank equally in right of payment with all of our existing unsecured and unsubordinated indebtedness.

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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 March ~~26, 2023~~,31, 2024, the related consolidated statements of earnings, comprehensive income, cash flows and equity for the quarters ended March ~~26, 2023~~31, 2024 and March ~~27, 2022,~~26, 2023, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S. 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, ~~2022,~~2023, 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 ~~26, 2023,~~23, 2024, 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, ~~2022,~~2023, 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

April ~~18, 2023~~23, 2024

2224

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand our results of operations and financial condition. The MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and notes to consolidated financial statements and with our Annual Report on Form 10-K for the year ended December 31, ~~2022 (2022~~2023 (2023 Form 10-K).

BUSINESS OVERVIEW

We are a global ~~security~~defense technology company driving innovation and ~~aerospace company~~advancing scientific discovery. Our all-domain mission solutions and 21st Century Security vision accelerate the delivery of transformative technologies to our customers. We are 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 the quarter ended March ~~26, 2023, 73%~~31, 2024, 75% of our ~~$15.1~~$17.2 billion in net sales were from the U.S. Government, either as a prime contractor or as a subcontractor (including ~~63%~~66% from the Department of Defense (DoD)), ~~26%~~24% 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.

U.S. Budget Environment

With ~~nearly~~ three quarters of our sales from the U.S. ~~government,~~Government, U.S. ~~government~~Government spending levels, particularly defense spending, and timely funding thereof can affect our financial performance over the short and long term.

On ~~December 29, 2022,~~March 22, 2024, the President signed the ~~FY 2023 Omnibus~~second Fiscal Year (FY) 2024 Consolidated Appropriations ~~Act~~package into law, which ~~provides $858~~includes the DoD. This legislation reflects the Fiscal Responsibility Act (FRA) spending limit of $886 billion ~~in total national defense funding,~~for National Defense, of which ~~$816.7~~$842 billion iswas for the DoD base budget. ~~This reflects a $44.6 billion increase over the FY 2023 request for national defense spending, and a $43.7 billion increase for the DoD.~~

The President’s ~~Fiscal Year (FY) 2024~~FY 2025 budget request was submitted to Congress on March ~~9, 2023~~11, 2024, initiating the FY ~~2024~~2025 defense authorization and appropriations legislative process. The request ~~includes $866~~included $895 billion for National Defense, of which ~~$842~~$850 billion is for the DoD base ~~budget.~~budget, in keeping with the limit established by the FRA. While compression on overall requirements driven by the FRA limit is evident, the Office of the Secretary of Defense has stated the FY 2025 budget proposal meets their objectives of keeping National Defense Strategy priorities on track.

~~In addition~~On April 20, 2024, the House of Representatives passed three bills providing a total of $95 billion in additional supplemental funding for Ukraine, Israel and Taiwan, to include funding for the restock of U.S. munitions capacity, and a fourth bill to impose sanctions and allow the use of seized Russian assets to assist Ukraine. The four bills were combined into to one and sent to the FY 2024 budget process, Congress will have to contend with the legal limit on U.S. debt, commonly known as the debt ceiling. The current statutory limit of $31.4 trillion was reached in January, requiring the Treasury Department to take accounting measures to continue normally financing U.S. government obligations while avoiding exceeding the debt ceiling. ItSenate, where it is expected ~~however,~~to be passed and subsequently signed into law in the ~~U.S. government will exhaust these measures by June 2023. If~~near-term.

We anticipate the debt ceiling is not raised, the U.S. government may not be able to fulfill its funding obligations and there could be significant disruption to all discretionary programs and wider financial and economic repercussions. The federal budget ~~and debt ceiling are expected to~~will continue to be subject to debate and compromise shaped by, among other things, heightened political tensions and the ~~subject of considerable congressional debate. Although we believe DoD, intelligence~~2024 elections, the global security environment, inflationary pressures, and ~~homeland security programs will continue to receive consensus support for increased~~macroeconomic conditions. The result may be shifting funding priorities, which could have material impacts on defense spending broadly and ~~would likely receive priority if this scenario came to fruition, the effect on individual programs or Lockheed Martin cannot be predicted at this time.~~our programs.

See also the discussion of U.S. Government funding risks within “Item 1A, Risk Factors” included in our ~~2022~~2023 Form 10-K.

Geopolitical and Economic Environment

We operate in a complex and evolving global security environment and our business is affected by geopolitical and security issues. Russia’s invasion of Ukraine, ~~has significantly~~conflicts in the Middle East and heightened tension in the Pacific region have elevated global ~~geopolitical tensions and~~ security ~~concerns. As a result, we have received~~concerns resulting in increased interest for ~~certain of~~ our products and services as countries seek to improve their security posture. In this context, the U.S. Government, our largest customer, continues to align its budget with the defense priorities set forth in the 2022 National Defense Strategy. In addition, security assistance provided by the U.S. Government and its allies to Ukraine has ~~created~~increased U.S. Government and allied demand to replenish U.S. stockpiles, resulting in additional and potential future orders, including for ~~our~~the ramp-up in production capacity for certain products. We have seen this interest result in initiation of new contract discussions. However, given the long-cycle nature of our business and current industry capacity, we do not expect a significant increase in near term sales from new contracts in response to the conflict. We continue to expect additional orders over the next several years attributable to the global threat environment. We operate

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in a long-cycle business and the U.S. government has been focused on increasing industry capacity to meet demand. For example, in 2024, our Missiles and Fire Control business segment expects to begin realizing higher year over year sales from the production ramp up associated with munitions replenishment. We continue to work with the U.S. Government and our supply chain to evaluate increases in capacity at our operations ~~and the supply chain~~ to anticipate potential demand and enable us to deliver critical capabilities.

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COVID-19 has previously impacted our operational and financial performance and its impact in future periods, including our ability to execute our programs in the expected timeframe, remains uncertain and will depend on future COVID-19 related developments, including the impact of COVID-19 infection or potential new variants or subvariants, and supplier impacts and related government actions to prevent and manage disease spread. The long-term impacts of COVID-19 on government budgets and other funding priorities, including international priorities, that impact demand for our products and services also are difficult to predict, but could negatively affect our future results and performance.

Our business and financial performance ~~may~~is also be affected by general economic conditions. ~~Heightened~~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 ~~the potential worsening of~~ macro-economic conditions present risks for Lockheed Martin, our suppliers and the stability of the broader defense industrial base. ~~We have been experiencing impacts to our~~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 ~~have signaled inflation related~~are reducing the typical duration of pricing validity in their proposals to us, which is operationally challenging and increases the risk of cost ~~pressures, which will~~volatility. We continue to ~~flow~~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, identifying alternative sources, and optimizing our supply chain organization through ~~to our costs~~digital transformation and ~~pricing. Although~~workforce development. If we experience significant supply chain issues or high rates of inflation, ~~did not significantly impact our financial results in the first quarter of 2023, if inflation remains at current levels for an extended period, or increases,~~ and we are unable to successfully mitigate the impact, our ~~costs are likely to increase, resulting in pressure on our~~future profits, margins and cash flows, particularly for existing fixed-price ~~contracts.~~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.~~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.

For additional risks to the company related to the geopolitical and economic environment, see ~~Item~~“Item 1A, Risk ~~Factors~~Factors” of our ~~2022~~2023 Form 10-K.

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CONSOLIDATED RESULTS OF OPERATIONS

Our operating cycle is primarily long-term and involves many types of contracts for the design, development and manufacture of products and related activities with varying delivery schedules. Additionally, we close our books and records on the last Sunday of each month, except for the month of December, as our fiscal year ends on December 31, to align our financial closing with our business processes. Because of this, the number of weeks in a reporting quarter may vary slightly during the year and for comparable prior year periods. Consequently, the results of operations of a particular year, or year-to-year comparisons of sales and profits, may not be indicative of future operating results. The following discussions of comparative results should be reviewed in this context. All per share amounts cited in these discussions are presented on a “per diluted share” basis, unless otherwise noted. Our consolidated results of operations were as follows (in millions, except per share data):

Quarters Ended

March 26,
2023

March 27,
2022

Quarters Ended

March 31,
2024

March 26,
2023

Net sales

15,126

14,964

Cost of sales

(13,080)

(13,055)

Cost of sales

Gross profit

2,046

1,909

Other (expense) income, net

(9)

Gross profit

Other income (expense), net

Operating profit

2,037

1,933

Operating profit

Interest expense

(202)

(135)

Non-service FAS pension income

110

140

Non-service FAS pension income

Other non-operating income, net

123

Earnings before income taxes

1,994

2,061

Earnings before income taxes

Income tax expense

(305)

(328)

Net earnings

1,689

1,733

Net earnings

Diluted earnings per common share

6.61

6.44

Certain amounts reported in other income (expense) ~~income,~~, net, including our share of earnings or losses from equity method investees, are included in the operating profit of our business segments. Accordingly, such amounts are included in the discussion of our business segment results of operations.

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Net Sales

We generate sales from the delivery of products and services to our customers. Our consolidated net sales were as follows (in millions):


		Quarters Ended
				March 26, 2023			March 27, 2022
											Quarters Ended
			March 31, 2024													March 31, 2024	March 26, 2023
Products	Products			$	12,526		$	12,494
% of total net sales	% of total net sales			82.8		%	83.5		%	% of total net sales		82.6	%	82.8	%
Services	Services			2,600			2,470
% of total net sales	% of total net sales			17.2		%	16.5		%	% of total net sales		17.4	%	17.2	%
Total net sales	Total net sales			$	15,126		$	14,964

Substantially all of our contracts are accounted for using the percentage-of-completion cost-to-cost method. Under the percentage-of-completion cost-to-cost method, we record net sales on contracts over time based upon our progress towards completion on a particular contract, as well as our estimate of the profit to be earned at completion. The following discussion of material changes in our consolidated net sales should be read in tandem with the subsequent discussion of changes in our consolidated cost of sales and our business segment results of operations because changes in our sales are typically accompanied by a corresponding change in our cost of sales due to the nature of the percentage-of-completion cost-to-cost method.

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Product Sales

Product sales increased $1.7 billion, or 13%, during the quarter ended March ~~26, 2023 were comparable~~31, 2024, compared to the same period in ~~2022 as~~2023. The increase was primarily attributable to higher product sales of ~~$375~~$575 million at ~~Space were mostly offset by lower product sales of $260~~MFC, $450 million at RMS, $435 million at Aeronautics and ~~$85~~$210 million at ~~MFC.~~Space. Higher product sales at ~~Space was~~MFC were due to ~~higher development volume for classified programs~~production ramp up on Guided Multiple Launch Rocket Systems (GMLRS), High Mobility Artillery Rocket System (HIMARS), Joint Air-to-Surface Standoff Missile (JASSM) and Long Range Anti-Ship Missile (LRASM) programs. Higher product sales at RMS were due to new program ramp up within the laser systems portfolio and higher ~~development~~ volume ~~for Next Generation Interceptor (NGI). Lower~~on various C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) and radar programs. Higher product sales at Aeronautics were due to ~~lower volume on F-35 production contracts, partially offset by~~ higher volume on classified and F-35 production contracts. ~~Lower~~Higher product sales at ~~MFC~~Space were due to ~~lower~~higher volume ~~for Guided Multiple Launch Rocket Systems (GMLRS).~~on Fleet Ballistic Missile (FBM) and transport layer programs and ramp up in the hypersonic development programs.

Service Sales

Service sales increased ~~$130~~$399 million, or 5%15%, during the quarter ended March ~~26, 2023~~31, 2024, compared to the same period in ~~2022.~~2023. The increase iswas primarily attributable to higher service sales of approximately $140 million at Aeronautics, $130 million at RMS and $100 million at Space. Higher service sales at Aeronautics were due to higher volume on C-130 and F-35 sustainment contracts.

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Higher service sales at RMS were due to higher volume on various Training and Logistics Services and C6ISR programs. Higher service sales at Space were due to higher volume on national security space services.

Cost of Sales

Cost of sales, for both products and services, consist of materials, labor, subcontracting costs and an allocation of indirect costs (overhead and general and administrative), as well as the costs to fulfill our industrial cooperation agreements, sometimes referred to as offset agreements, required under certain contracts with international customers. For each of our contracts, we monitor the nature and amount of costs at the contract level, which form the basis for estimating our total costs to complete the contract. Our consolidated cost of sales were as follows (in millions):

Quarters Ended (a)
March 26,
2023 March 27,
2022
Cost of sales – products $ (11,151) $ (11,107)
% of product sales 89.0 % 88.9 %
Cost of sales – services (2,284) (2,167)
% of service sales 87.8 % 87.7 %
Other unallocated, net 355 219
Total cost of sales $ (13,080) $ (13,055)

~~(a)~~Effective January 1, 2023, the company reclassed intangible asset amortization expense out of the business segment operating profit and into the unallocated items line item to better align with how management views and manages the business. See “Note 1 - Basis of Presentation” included in our Notes to Consolidated Financial Statements for further information regarding the impact of this change on our current and prior period segment operating profit.



	Quarters Ended
		March 31, 2024				March 26, 2023
Cost of sales – products			$	(12,884)			$	(11,151)
% of product sales			90.8		%		89.0		%
Cost of sales – services			(2,603)				(2,284)
% of service sales			86.8		%		87.8		%

Other unallocated, net			285				355
Total cost of sales			$	(15,202)			$	(13,080)

The following discussion of material changes in our consolidated cost of sales for products and services should be read in tandem with the preceding discussion of changes in our consolidated net sales and our business segment results of operations. Except for potential impacts to our programs resulting from supply chain disruptions and inflation, we have not identified any additional developing trends in cost of sales for products and services that would have a material impact on our future operations.

Product Costs

Product costs during the quarter ended March 26, 2023 were comparable to the same period in 2022 as higher product costs of $305 million at Space were offset by lower product costs of $240 million at Aeronautics and $75 million at MFC. Higher product costs at Space were due to higher development volume for classified programs and higher development volume for NGI. Lower product costs at Aeronautics were due to lower volume on F-35 production contracts, partially offset by higher volume on classified contracts. Lower product costs at MFC were due to lower volume for GMLRS.

~~Service Costs~~

~~Service costs~~ increased ~~$117 million,~~$1.7 billion, or 5%16%, during the quarter ended March ~~26, 2023~~31, 2024, compared to the same period in ~~2022.~~2023. The increase was primarily attributable to higher product costs of approximately $650 million at MFC, $460 million at Aeronautics, $400 million at RMS and $220 million at Space due to higher volume and production ramp up as described above in “Product Sales”.

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Service Costs

Service costs increased $319 million, or 14%, during the quarter ended March 31, 2024, compared to the same period in 2023. The increase was primarily attributable to higher service costs of $115 million at Aeronautics, $95 million at RMS and $80 million at Space due to higher volume ~~on F-35 sustainment contracts.~~as described above in “Service Sales”.

Other Unallocated, Net

Other unallocated, net primarily includes the FAS/CAS pension operating adjustment (which represents the difference between total CAS pension cost recorded in our business segments’ results of operations and the service cost component of Financial Accounting Standards (FAS) pension ~~expense)~~income (expense)), stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, intangible asset amortization expense and other corporate costs. These items are not allocated to the business segments and, therefore, are not allocated to cost of sales for products or services. Other unallocated, net reduced cost of sales by $285 million during the quarter ended March 31, 2024, compared to $355 million during the quarter ended March 26, ~~2023, compared to $219 million during the quarter ended March 27, 2022. Other~~2023. The decrease in other unallocated, net was ~~higher~~ primarily due

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to lower gains ~~during~~from the ~~quarter ended March 26, 2023, compared to losses during the same period~~changes in ~~2022 for~~ the fair value of assets and liabilities related to deferred compensation ~~plans.~~plans during the quarter ended March 31, 2024 compared to the same periods in 2023 and fluctuations in costs associated with various corporate items, none of which were individually significant.

Other Income (Expense) ~~Income,~~, Net

Other income (expense) ~~income,~~, net, primarily includes earnings generated by equity method investees. Other income, net was $36 million during the quarter ended March 31, 2024, compared to other expense, net ~~was~~of $9 million during the quarter ended March 26, ~~2023, compared to other~~2023. Other income ~~net of $24 million during the quarter ended March 27, 2022. Other expense,~~(expense), net during the quarter ended March ~~26, 2023 included lower~~31, 2024 includes higher earnings generated by our equity method investment in ULA due to ~~lower~~higher launch ~~volume and an increase in new product development costs.~~volume.

Interest Expense

Interest expense ~~during the quarter ended March 26, 2023~~ was ~~$202~~$255 million ~~compared to $135~~and $202 million during the ~~quarter~~quarters ended March ~~27, 2022.~~31, 2024 and March 26, 2023. The increase in interest expense in ~~2023~~2024 resulted primarily from the issuance of senior unsecured notes in ~~October of 2022.~~January 2024 and May 2023.

Non-Service FAS Pension Income

Non-service FAS pension income was $16 million and $110 million during the ~~quarter~~quarters ended March 31, 2024 and March 26, ~~2023, compared to $140 million during the quarter ended March 27, 2022.~~2023. The decrease was primarily due to ~~higher interest cost~~a lower prior service credit amortization and ~~lower plan assets and associated expected return. See~~a reduced asset base as detailed in “Note 6 - Postretirement Benefit Plans” included in our Notes to Consolidated Financial ~~Statements for additional information.~~Statements.

Other Non-operating Income, Net

Other non-operating income, net primarily includes gains or losses related to changes in the fair value of early-stage company investments or gains or losses upon sale of these investments. ~~During the quarter ended March 26, 2023, other~~Other non-operating income, net was ~~$49~~$45 million ~~compared to $123~~and $49 million during the ~~quarter~~quarters ended March ~~27, 2022. The decrease during the quarter ended~~31, 2024 and March 26, ~~2023 was primarily due to lower gains for the fair value of certain investments.~~2023. See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.

Income Tax Expense

Our effective income tax ~~rate was~~rates were 15.8% and 15.3% for the ~~quarter~~quarters ended March ~~26, 2023~~31, 2024 and ~~15.9% for the quarter ended~~ March ~~27, 2022.The~~26, 2023. The rates for ~~both~~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.

~~The rate for the first quarter~~Table of ~~2023 was lower than the~~Contents ~~first~~ ~~quarter of 2022 primarily due to increased research and development tax credits.~~

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 or experimental 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.

Beginning in 2022, The Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years for tax purposes. This provision is expected to increase our ~~2023~~2024 cash tax liability by approximately ~~$575~~$350 million and our net deferred tax assets will increase by a similar amount. The actual impact on ~~2023~~2024 cash tax liability will depend on the amount of research and development expenses paid or incurred in ~~2023~~2024 among other factors. The cash tax impact will continue over the five-year amortization period but will decrease over the period and be immaterial by 2027.

As of December 31, 2022, our liabilities associated with uncertain tax positions were $1.6 billion. For the quarter ended March 26, 2023, our liabilities associated with uncertain tax positions increased to $1.9 billion with a corresponding increase to net deferred tax assets primarily as a result of the provision described above from the Tax Cuts and Jobs Act of 2017.

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We are regularly under audit or examination by tax authorities, including foreign tax authorities (including in, amongst others, Australia, Canada, India, Italy, Japan, Poland, and the United Kingdom). The final determination of tax audits and any related litigation could similarly result in unanticipated increases in our tax expense and affect profitability and cash flows.

~~On August 16, 2022, the President signed into law the Inflation Reduction Act~~The Organisation for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of ~~2022 which contained provisions~~15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2), with certain aspects of Pillar 2 effective January 1, ~~2023, including~~2024 and other aspects effective January 1, 2025. While it is uncertain whether the U.S. will enact legislation to adopt Pillar 2, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar 2. We do not expect Pillar 2 to have a ~~15% corporate minimum~~material impact on our effective tax ~~and a 1% excise tax on stock buybacks, both~~rate or our consolidated results of ~~which were immaterial to our financial results,~~operation, financial position, and cash flows.

Net Earnings

We reported net earnings of $1.5 billion ($6.39 per share) during the quarter ended March 31, 2024, compared to $1.7 billion ($6.61 per share) during the quarter ended March 26, ~~2023, compared to $1.7 billion ($6.44 per share) during the quarter ended March 27, 2022.~~2023. Net earnings and earnings per share for the quarter ended March ~~26, 2023~~31, 2024 were affected by the factors mentioned above. Earnings per share also benefited from a net decrease of approximately ~~13.5~~14.1 million weighted average common shares outstanding during the quarter ended March ~~26, 2023,~~31, 2024, compared to the same ~~periods~~period in ~~2022.~~2023. The reduction in weighted average common shares was a result of share repurchases, partially offset by share issuance under our stock-based awards and certain defined contribution plans.

BUSINESS SEGMENT RESULTS OF OPERATIONS

We operate in four business segments: Aeronautics, MFC, RMS and Space. We organize our business segments based on the nature of products and services offered.

Business segment operating profit excludes the FAS/CAS pension operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, retiree benefits, significant severance charges, significant asset impairments, gains or losses from divestitures, intangible asset amortization expense, and other miscellaneous corporate activities. Excluded items are included in the reconciling item “Unallocatedperformance. See “Note 3 - Information on Business Segments – unallocated items” ~~between operating profit from our business segments and our consolidated operating profit.~~.

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Sales and operating profit for each of our business segments were as follows (in millions):
Quarters Ended
March 26,
2023 March 27,
2022
Net sales
Aeronautics $ 6,269 $ 6,401
Missiles and Fire Control 2,388 2,452
Rotary and Mission Systems 3,510 3,552
Space 2,959 2,559
Total net sales $ 15,126 $ 14,964
Operating profit
Aeronautics $ 675 $ 679
Missiles and Fire Control 377 385
Rotary and Mission Systems 350 406
Space 280 248
Total business segment operating profit 1,682 1,718
Unallocated items
FAS/CAS pension operating adjustment 415 426
Intangible asset amortization expense (62) (62)
Other, net 2 (149)
Total unallocated items 355 215
Total consolidated operating profit $ 2,037 $ 1,933

Effective January 1, 2023, we no longer consider amortization expense related to purchased intangible assets when evaluating the operating performance of our business segments. As a result, intangible asset amortization expense, which was previously included in segment operating profit, is now reported in unallocated items within total consolidated operating profit. This change has been applied to the accompanying amounts above, including the amounts for 2022. See “Note 1 - Basis of Presentation” included in our Notes to Consolidated Financial Statements for further information regarding the impact of this change on our current and prior period segment operating profit. We also included supplemental tables under the caption Pro Forma Business Segment Summary Operating Results in our earnings release included as exhibit 99.1 to our Current Report on Form 8-K filed January 24, 2023, which provide unaudited pro forma financial information reflecting the impact of the change in presentation as-if it had been applicable for the quarters and year to date periods in 2022 and 2021. The supplemental tables, the earnings release and the Current Report on Form 8-K are not, and shall not be deemed to be, incorporated by reference herein.


	Quarters Ended
		March 31, 2024			March 26, 2023
Net sales
Aeronautics			$	6,845		$	6,269
Missiles and Fire Control			2,993			2,388
Rotary and Mission Systems			4,088			3,510
Space			3,269			2,959
Total net sales			$	17,195		$	15,126
Operating profit
Aeronautics			$	679		$	675
Missiles and Fire Control			311			377
Rotary and Mission Systems			430			350
Space			325			280
Total business segment operating profit			1,745			1,682
Unallocated items
FAS/CAS pension operating adjustment			406			415
Intangible asset amortization expense			(61)			(62)
Other, net			(61)			2
Total unallocated items			284			355
Total consolidated operating profit			$	2,029		$	2,037

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The total FAS/CAS pension adjustments, including the service and non-service cost components of FAS pension income for our qualified defined benefit pension plans, were as follows (in millions):

Quarters Ended

March 26,
2023

March 27,
2022

Quarters Ended

March 31,
2024

March 26,
2023

Total FAS income and CAS cost

FAS pension income

116

FAS pension income

Less: CAS pension cost

431

450

Less: CAS pension cost

Total FAS/CAS pension adjustment

525

566

Service and non-service cost reconciliation

FAS pension service cost

(16)

(24)

Less: CAS pension cost

431

450

Less: CAS pension cost

Total FAS/CAS pension operating adjustment

415

426

Non-service FAS pension income

110

140

Non-service FAS pension income

Total FAS/CAS pension adjustment

525

566

Total FAS/CAS pension adjustment

Management evaluates performance on our contracts by focusing on net sales and operating profit and not by type or amount of operating expense. Consequently, our discussion of business segment performance focuses on net sales and operating profit, consistent with our approach for managing the business. This approach is consistent throughout the life cycle of our contracts, as management assesses the bidding of each contract by focusing on net sales and operating profit and monitors performance on our contracts in a similar manner through their completion.

We regularly provide customers with reports of our costs as the contract progresses. The cost information in the reports is accumulated in a manner specified by the requirements of each contract. For example, cost data provided to a customer for a product would typically align to the subcomponents of that product (such as a wing-box on an aircraft) and for services would align to the type of work being performed (such as aircraft sustainment). Our contracts generally allow for the recovery of costs in the pricing of our products and services. Most of our contracts are bid and negotiated with our customers under circumstances in which we are required to disclose our estimated total costs to provide the product or service. This approach for negotiating contracts with our U.S. Government customers generally allows for recovery of our actual costs plus a reasonable profit margin. We also may enter into long-term supply contracts for certain materials or components to coincide with the production schedule of certain products and to ensure their availability at known unit prices.

Many of our contracts span several years and include highly complex technical requirements. At the outset of a contract, 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 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 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. Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase. 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.~~

We have a number of programs that are designated as classified by the U.S. Government which cannot be specifically described. The operating results of these classified programs are included in our consolidated and business segment results and are subjected to the same oversight and internal controls as our other programs.

Our net sales are primarily derived from long-term contracts for products and services provided to the U.S. Government as well as FMS contracted through the U.S. Government. We recognize revenue as performance obligations

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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.

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

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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.

Changes in net sales and operating profit generally are expressed in terms of ~~volume.~~volume, contract mix, and/or performance (referred to as profit booking rate adjustments). Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract. Contract mix refers to changes in the ratio of contract type or life cycle (e.g., cost-type, fixed-price, development, production and/or sustainment).

Comparability of our segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on our contracts. Increases in the profit booking rates, typically referred to as favorable profit booking rate adjustments, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate and are typically referred to as unfavorable profit booking rate adjustments. Increases or decreases in profit booking rates are recognized in the current period they are determined and reflect the inception-to-date effect of such changes. Segment operating profit and margin ~~may also~~can be impacted favorably or unfavorably by, ~~other~~for example, certain items listed below, which may or may not impact sales. Favorable items ~~may~~ include the positive resolution of contractual matters, cost recoveries on severance and restructuring, insurance recoveries and gains on sales of assets. Unfavorable items ~~may~~ include the adverse resolution of contractual matters; ~~COVID-19 impacts or~~ supply chain disruptions; restructuring charges (except for significant severance actions, which are excluded from segment operating results); reserves for disputes; certain asset impairments; and losses on sales of certain assets.

Our consolidated net profit booking rate adjustments increased segment operating profit by approximately $195 million during the quarter ended March 31, 2024 and $415 million during the quarter ended March 26, ~~2023 and $405~~2023. The impact to 2024 segment operating profit includes a reach-forward loss of $100 million ~~during~~recognized on a classified program at our MFC business segment (as further described on page 22, see the ~~quarter ended March 27, 2022.~~discussion under “Contract Estimates” in Note 10 - Other included in our Notes to Consolidated Financial Statements).

We periodically experience performance issues and record losses for certain programs. For further discussion on programs, ~~at Aeronautics and RMS,~~ see “Note 10 - Other” included in our Notes to Consolidated Financial Statements.

We have contracted with the Canadian Government for the Canadian Maritime Helicopter Program at our RMS business segment that provides for design, development, and production of CH-148 aircraft (the Original Equipment contract), which is a military variant of the S-92 helicopter, and for logistical support to the fleet (the In Service Support contract) over an extended time period. The program has experienced performance issues, including delays in the final aircraft deliveries from the original contract requirement, and the Royal Canadian Air Force’s flight hours have been less than originally anticipated, which has impacted program revenues and the recovery of our costs under this program. Future sales and recovery of existing and future costs under the program are highly dependent upon achieving a certain number of flight hours, which ~~are uncertain and dependent on~~ aircraft availability and performance, and the availability of Canadian government resources. We are currently in discussions with the Canadian Government to potentially restructure certain contractual terms and conditions that may be beneficial to both parties. Future performance issues or changes in our estimates due to revised contract scope or customer requirements may affect our ability to recover our costs and may result in a loss that could be material to our operating results.

We also have a number of contracts with Türkish industry for the Türkish Utility Helicopter Program (TUHP), which anticipates co-production with Türkish industry for production of T70 helicopters for use in Türkiye, as well as the related provision of Türkish goods and services under buy-back or offset obligations, to include the future sales of helicopters built in Türkiye for sale globally. In 2020, the U.S. Government imposed certain sanctions on Türkish entities and persons that have affected our ability to perform under the TUHP contracts and we have provided force majeure notices under the affected contracts. The TUHP contracts may be restructured or terminated, either in whole or in part, which could result in a further reduction in sales, the imposition of penalties or assessment of damages, and increased unrecoverable costs, which could have an adverse effect on our financial results.

Our MFC business segment was previously awarded a competitively bid classified contract, which includes multiple phases of the program. We are currently performing on a phase which is primarily structured as cost-type. Additional phases are primarily fixed price and are not currently able to be awarded. If the additional phases are awarded at a later date, we expect that those phases would be performed at a loss. We will continue to monitor the circumstances on the program and may be required to recognize a reach-forward loss if circumstances change. Any such losses could be material to our financial results.

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Aeronautics

Summary operating results for our Aeronautics business segment were as follows (in millions):

Quarters Ended

March 26,
2023

March 27,
2022

Quarters Ended

March 31,
2024

March 26,
2023

Net sales

6,269

6,401

Operating profit

675

679

Operating profit

Operating margin

10.8

10.6

Operating margin

Aeronautics’ net sales induring the quarter ended March ~~26, 2023 decreased $132~~31, 2024 increased $576 million, or 2%9%, compared to the same period in ~~2022.~~2023. The ~~decrease~~increase was primarily attributable to ~~lower~~higher net sales of ~~$335~~$305 million ~~for~~on the F-35 program due to ~~lower~~higher volume on production, ~~contracts. This decrease was partially offset by higher sales of $135~~development and sustainment contracts; $155 million on classified programs ~~due to~~driven by higher ~~volume~~volume; and ~~$70~~$60 million ~~for~~on the F-16 program due to the ramp up on production.

~~higher production and sustainment volume.~~Table of Contents

Aeronautics’ operating profit induring the quarter ended March ~~26, 2023~~ 31, 2024 was comparable to the same period in ~~2022.~~2023. Operating profit increased $50 million on the F-16 program as operating profit for the ~~F-35 program was comparable as lower volume on production contracts was mostly offset by contract mix.~~ ~~Operating profit for~~first quarter of 2023 reflects the ~~F-16 program was comparable as higher volume on production and sustainment contracts was offset by higher~~impact of unfavorable profit adjustments on a production contract and sustainment ~~contracts.~~contracts as a result of schedule delays related to software and technical specification risks that did not recur in the first quarter of 2024. This increase was partially offset by lower operating profit of $30 million on the F-35 program primarily due to lower net profit adjustments on production contracts as a result of higher than anticipated material costs, partially offset by higher volume described above. Total net profit booking rate adjustments were ~~approximately $15~~$40 million lower in thethe first quarter of ~~2023~~ 2024 compared to the same period in ~~2022~~.2023.

Missiles and Fire Control

Summary operating results for our MFC business segment were as follows (in millions):
Quarters Ended
March 26,
2023 March 27,
2022
Net sales $ 2,388 $ 2,452
Operating profit 377 385
Operating margin 15.8 % 15.7 %


	Quarters Ended
		March 31, 2024				March 26, 2023
Net sales			$	2,993			$	2,388
Operating profit			311				377
Operating margin			10.4		%		15.8		%

MFC’s net sales induring the quarter ended March ~~26, 2023 decreased $64~~31, 2024 increased $605 million, or 3%25%, compared to the same period in ~~2022.~~2023. The ~~decrease~~increase was primarily attributable to ~~lower~~higher net sales of $85 million for sensors and global sustainment programs as net sales for the first quarter of 2022 reflect the impact of a favorable profit adjustment on an international program as a result of a requirements modification that did not recur in the first quarter of 2023; and lower net sales of $60$460 million for tactical and strike missile programs due to ~~lower volume (Guided Multiple Launch Rocket Systems (GMLRS)). These decreases were partially offset by higher net sales of $70~~production ramp up on GMLRS, HIMARS, JASSM and LRASM programs; and $100 million for integrated air and missile defense programs primarily due to ~~the impact of~~ higher ~~net favorable profit adjustments (Patriot Advanced Capability-3 (PAC-3))~~volume on PAC-3 and Terminal High Altitude Area Defense (THAAD).

MFC’s operating profit induring the quarter ended March ~~26, 2023~~31, 2024 decreased $8$66 million, or 2%18%, compared to the same period in ~~2022.~~ 2023. The decrease was primarily attributable to lower operating profit ~~of $85 million~~ for ~~sensors~~tactical and ~~global sustainment~~strike missile programs due to ~~the favorable~~a $100 million reach-forward loss recognized for an option on a classified program and an unfavorable profit adjustment on ~~an international program in the first quarter~~HELLFIRE as a result of ~~2022 as described above. This decrease was~~additional costs expected to be incurred associated with a contract claim, partially offset by ~~higher operating profit of $60 million for integrated air and missile defense programs due to~~ the impact of higher net favorable profit adjustments (PAC-3). In addition, operating margin was positively impacted when compared to the first quarter of 2022 due to contract mix at tactical and strike missiles.production ramp up described above. Total net profit booking rate adjustments, inclusive of the $100 million loss described above, were ~~approximately $25~~$120 million lower in the first quarter of ~~2023~~2024 compared to the same period in 2023.~~2022~~.

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Rotary and Mission Systems

~~On December 5, 2022,~~In February 2024, the U.S. Army selected Sikorsky’s competitor in the Future Long Range Assault Aircraft Competition, a component of its Future Vertical Lift initiative to replace a portion of its assault and utility helicopter fleet. On December 28, 2022, Sikorsky, on behalf of Team DEFIANT, filed a protest with the U.S. Government Accountability Office (GAO) challenging the U.S. Army’s decision, and on April 6, 2023 the GAO issued a decision denying the protest. We are not pursuing further litigation in this matter. Sikorsky remains one of two competitors for the other component of the Future Vertical Lift initiative,announced it is cancelling the Future Attack Reconnaissance Aircraft ~~competition.~~(FARA) program at the conclusion of fiscal year 2024, for which our Sikorsky business was competing. We are currently evaluating the potential effect of this decision on our Sikorsky business operations including assessing the recoverability of certain assets.

Summary operating results for our RMS business segment were as follows (in millions):
Quarters Ended
March 26,
2023 March 27,
2022
Net sales $ 3,510 $ 3,552
Operating profit 350 406
Operating margin 10.0 % 11.4 %


	Quarters Ended
		March 31, 2024				March 26, 2023
Net sales			$	4,088			$	3,510
Operating profit			430				350
Operating margin			10.5		%		10.0		%

RMS’ net sales induring the quarter ended March ~~26, 2023 decreased $42~~31, 2024 increased $578 million, or 1%16%, compared to the same period in ~~2022.~~2023. The ~~decrease~~increase was primarily attributable tolower net sales of $75 million for Sikorsky helicopter programs due to lower production volume (Black Hawk); and lower net sales of $60 million for various C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to lower volume. These decreases were partially offset by higher net sales of ~~$85~~$295 million ~~for~~on integrated warfare systems and sensors (IWSS) programs due to new program ramp up within the laser systems portfolio and higher volume ~~(Aegis~~on the Aegis and ~~TPY-4 programs).~~

~~RMS’ operating profit in the quarter ended March 26, 2023 decreased $56~~radar programs; $150 million ~~or 14%,~~ ~~compared~~for various C6ISR programs due to ~~the same period in 2022. The decrease was primarily attributable to lower operating profit of $65~~higher volume; and $100 million for Sikorsky helicopter programs due to ~~lower production~~higher volume ~~net~~on Seahawk and CH-53K programs.

RMS’ operating profit during the quarter ended March 31, 2024 increased $80 million, or 23%, compared to the same period in 2023. The increase was primarily attributable to higher operating profit of $40 million on IWSS programs due to higher volume described above and a favorable profit ~~adjustments,~~rate adjustment as a result of the delivery of a ground-based radar which retired the technical risk; and $25 million on Sikorsky helicopter programs due to higher volume described above and higher margins due to contract mix, ~~on the Black Hawk program and~~partially offset by unfavorable profit adjustments ~~(CH-53K).~~on Seahawk programs. Total net

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profit booking rate adjustments were ~~$35~~$30 million lower in the first quarter of ~~2023~~2024 compared to the same period in ~~2022.~~2023.

Space

Summary operating results for our Space business segment were as follows (in millions):
Quarters Ended
March 26,
2023 March 27,
2022
Net sales $ 2,959 $ 2,559
Operating profit 280 248
Operating margin 9.5 % 9.7 %


	Quarters Ended
		March 31, 2024				March 26, 2023
Net sales			$	3,269			$	2,959
Operating profit			325				280
Operating margin			9.9		%		9.5		%

Space’s net sales induring the quarter ended March ~~26, 2023~~31, 2024 increased ~~$400~~$310 million, or ~~16%~~10%, compared to the same period in ~~2022.~~2023. The increase was primarily attributable to higher net sales of ~~$185~~$140 million for strategic and missile defense programs due to higher ~~development~~ volume ~~(Next~~on FBM and ramp up in the hypersonic and Next Generation Interceptor (NGI)); development programs; and higher net sales of ~~$170~~$115 million for national security space programs due to higher ~~development~~ volume ~~(classified programs)~~on Transport Layer and GPS III programs and ramp up on the impact of higher net favorable profit adjustments (Next Generation Overhead Persistent Infrared geosynchronous satellites (Next Gen OPIR) and classified programs); and higher net sales of $55 million for commercial civil space programs due to higher volume (Orion).Tracking Layer program.

Space’s operating profit induring the quarter ended March ~~26, 2023~~31, 2024 increased ~~$32~~$45 million, or ~~13%~~16%, compared to the same period in ~~2022.~~2023. The increase was primarily attributable to $30 million of higher equity earnings from our investment in United Launch Alliance (ULA) due to higher launch volume, and higher operating profit of ~~$70~~$20 million on strategic and missile defense programs due to the higher volume described above. These increases were partially offset by lower operating profit of $25 million for national security space programs due to the impact of ~~higher~~lower net favorable profit adjustments ~~(Next~~on Next Gen OPIR as a result of the timing of the award and classified programs). This increase was partially offset by $45 million of lower equity earnings from the company's investment in United Launch Alliance (ULA) due to lower launch volume and an increase in new product development costs.incentive fee assessments. Total net profit booking rate adjustments were ~~$85~~$30 million ~~higher~~lower in the first quarter of ~~2023~~2024 compared to the same period in ~~2022~~.2023.

Total equity earnings/(losses)~~/earnings~~ (primarily ULA) represented approximately $15 million or 5% in the first quarter of 2024, compared to approximately $(15) million, or (5)%~~, of Space's operating profit~~ for the same period in ~~the~~ ~~first quarter of~~ ~~2023, compared to~~ ~~approximately $30 million, or 12%~~ ~~in the~~ ~~first quarter of~~ ~~2022~~. 2023.

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FINANCIAL CONDITION

Liquidity and ~~Cash Flows~~Capital Resources

At March ~~26, 2023,~~31, 2024, we had cash and cash equivalents of ~~$2.4 billion.~~$2.8 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. However, we also have access to credit markets, if needed, for liquidity or general corporate purposes, including share repurchases. This access includes our $3.0 billion revolving credit facility or the ability to issue commercial paper and letters of credit to support customer advance payments and for other trade finance purposes such as guaranteeing our performance on particular contracts. There were no borrowings outstanding under the revolving credit facility and commercial paper at both March 31, 2024 and December 31, 2023. As of March 31, 2024, we were in compliance with all covenants contained in our debt and credit agreements.

We believe our cash and cash equivalents, our expected cash flow generated from operations and our access to credit markets will be sufficient to meet our cash requirements and cash deployment plans over the next twelve months and beyond based on our current business plans.

Cash received from customers ~~either from the payment of invoices for work performed or for advances from non-U.S. government customers in excess of costs incurred,~~ is our primary source of cash from operations. We generally do not begin work on contracts until funding is appropriated by the customer. 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.

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%~~42% of the sales we recorded during the quarter ended March ~~26, 2023,~~31, 2024, 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 amount of performance-based payments and the related milestones are

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encompassed 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.

The U.S. Government has indicated that it would consider progress payments as the baseline for negotiating payment terms on fixed-price contracts, rather than performance-based payments. In contrast to negotiated performance-based payment terms, progress payment provisions correspond to a percentage of the amount of costs incurred during the performance of the contract and are invoiced regularly as costs are incurred. Our cash flows may be affected if the U.S. Government changes its payment ~~policies or decides~~policies. The U.S. Government from time to ~~withhold~~time withholds payments on our billings. For example, the U.S. Government increased the progress payment rate applicable to us from 80% to 90% at the beginning of the COVID-19 pandemic and a reversal or modification of this policy could affect the timingcertain of our ~~cash flows. While~~billings based on contract terms or regulatory provisions. Ultimately, the impact of policy changes or withholding payments may delay the receipt of cash, but the cumulative amount of cash collected during the life of the contract should not vary.

Since the COVID-19 pandemic began, we have remained committed to accelerating payments to the supply chain with a focus on small and at-risk businesses. We will continue to utilize accelerated payments throughout 2023 on an as needed basis.

We have a ~~balanced~~disciplined and dynamic cash deployment strategy to invest in our business and key technologies to provide our customers with enhanced capabilities, enhance stockholder value, and position ourselves to take advantage of new business opportunities when they arise. Consistent with that strategy, we have continued to invest in our business and technologies through capital expenditures, independent research and development, and selective business acquisitions and investments.

We ~~have returned~~continue to return cash to stockholders through dividends and share repurchases. ~~During the quarter ended March 26, 2023, we entered into an accelerated share repurchase (ASR) agreement to repurchase $500 million of our common stock.~~ As of March ~~26, 2023,~~31, 2024, the total remaining authorization for future common share repurchases under our program was $9.5 billion, which is expected to be utilized over a three-year period through 2025. We expect to fund the repurchases through a combination of cash from operations and the issuance of additional debt.$9.0 billion. 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.

We continue to actively manage our debt levels, including maturities and interest rates. We actively 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.

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

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from the pension trust. ~~See “Note 6 - Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements for additional information.~~ Future pension risk transfer transactions could ~~also~~ 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 Cost Accounting Standards (CAS). We could be required to make pension contributions earlier and/or in excess than planned if our return on pension assets is less than our assumptions, which would reduce our free cash flow. We may also make additional contributions on an ad hoc basis at our discretion.

There were no material changes during the quarter ended March ~~26, 2023~~31, 2024 to our contractual commitments as presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our ~~2022~~2023 Form 10-K that were outside the ordinary course of our business.

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The following table provides a summary of our cash flow information followed by a discussion of the key elements (in millions):

Quarters Ended

March 26,
2023

March 27,
2022

March 31,
2024

March 26,
2023

Cash and cash equivalents at beginning of year

2,547

3,604

Operating activities

Net earnings

1,689

1,733

Noncash adjustments

265

352

Noncash adjustments

Changes in working capital

(267)

(654)

Other, net

(123)

(21)

Other, net

Net cash provided by operating activities

1,564

1,410

Net cash used for investing activities

(259)

(251)

Net cash used for financing activities

(1,412)

(2,880)

Net cash used for investing activities

Net cash provided by (used for) financing activities

Net change in cash and cash equivalents

(107)

(1,721)

Cash and cash equivalents at end of period

2,440

1,883

Cash and cash equivalents at end of period

Operating Activities

Net cash provided by operating activities during the quarter endedMarch ~~26, 2023 increased $154 million compared~~31, 2024 was comparable to the same period in 2022. The increase was primarily due to various changes in working capital, primarily production and billing cycles impacting contract assets and receivables (primarily F-35 program at Aeronautics and missile programs at MFC), partially offset by the timing of cash payments for accounts payable (primarily Aeronautics).2023.

Non-GAAP Financial Measure - Free Cash Flow

Free cash flow is a non-GAAP financial measure that we define as cash from operations less capital expenditures. Our capital expenditures are comprised of equipment and facilities infrastructure and information technology (inclusive of costs for the development or purchase of internal-use software that are capitalized). We use free cash flow to evaluate our business performance and overall liquidity, as well as a performance goal in our annual and long-term incentive plans. We believe free cash flow is a useful measure for investors because it represents the amount of cash generated from operations after reinvesting in the business and that may be available to return to stockholders and creditors (through dividends, stock repurchases and debt repayments) or available to fund acquisitions and other investments. The entire amount of free cash flow is not necessarily available for discretionary expenditures, however, because it does not account for certain mandatory expenditures, such as the repayment of maturing debt and pension contributions. While management believes that free cash flow as a non-GAAP financial measure may be useful in evaluating our financial performance, it should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies.

The following table reconciles net cash provided by operating activities to free cash flow (in millions):

Quarters Ended
March 26,
2023 March 27,
2022
Cash from operations $ 1,564 $ 1,410
Capital expenditures (294) (268)
Free cash flow $ 1,270 $ 1,142

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	Quarters Ended
	March 31, 2024		March 26, 2023
Cash from operations	$	1,635	$	1,564
Capital expenditures	(378)		(294)
Free cash flow	$	1,257	$	1,270

Investing Activities

Net cash used for investing activities during the quarter ended March ~~26, 2023~~31, 2024 increased $8$113 million compared to the same period in ~~2022.~~2023. Capital expenditures totaled ~~$294~~$378 million and ~~$268~~$294 million during the quarters ended March ~~26, 2023~~31, 2024 and March ~~27, 2022.~~26, 2023. 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.

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Financing Activities

Net cash ~~used for~~provided by financing activities ~~was $1.4 billion~~ during the quarter ended March ~~26, 2023,~~31, 2024 increased $1.5 billion compared to ~~$2.9 billion during~~ the same period in ~~2022.~~ 2023.

During the ~~quarters~~quarter ended March ~~26, 2023~~31, 2024 and March ~~27, 2022,~~26, 2023, we paid dividends totaling $780 million ($3.15 per share) and $784 million ($3.00 ~~per share) and $767 million ($2.80~~ per share).

During the quarter ended March ~~26, 2023,~~31, 2024, we paid ~~$500 million~~$1.0 billion to repurchase ~~1.1~~2.3 million shares of our common ~~stock, of which 0.2 million shares were received upon settlement in April 2023.~~stock. See “Note 9 - Stockholders’ Equity” included in our Notes to Consolidated Financial Statements for additional information. During the quarter ended March ~~27, 2022,~~26, 2023, we paid ~~$2.0 billion~~$500 million to repurchase ~~4.7~~1.1 million shares of our common ~~stock,~~stock.

During the quarter ended March 31, 2024, we received net proceeds of ~~which 0.6 million shares were received upon settlement in April 2022.~~

~~Capital Resources~~

~~At March 26, 2023, we held cash and cash equivalents of $2.4~~$2.0 billion ~~that was generally available to fund ordinary business operations without significant legal, regulatory, or other restrictions.~~

At March 26, 2023, we had a $3.0 billion revolving credit facility (the Revolving Credit Facility) with various banks with an expiration date of August 24, 2027 that is available for general corporate purposes including supporting commercial paper borrowings. We may request and the banks may grant, at their discretion, an increase in the borrowing capacity under the Revolving Credit Facility of up to an additional $500 million. There were no borrowings outstanding under the Revolving Credit Facility at March 26, 2023.

~~We have agreements in place with financial institutions to provide for the~~from issuance of commercial paper. The outstanding balance of commercial paper can fluctuate daily and the amount outstanding during the period may be greater than or less than the amount reported at the end of the period. There were no commercial paper borrowings outstanding as of March 26, 2023 and December 31, 2022. We may, as conditions warrant, from time to time issue commercial paper backed by our Revolving Credit Facility to manage the timing of cash flows. However, depending on market conditions, commercial paper may not be available on favorable terms or at all.

Our total outstanding short-term and long-term debt, net of unamortized discounts and issuance costs was $15.6 billion as of March 26, 2023 and is in the form of publicly-issued notes that bear interest at fixed rates. As of March 26, 2023, we were in compliance with all covenants containedsenior unsecured notes. See “Note 10 - Other” included in our ~~debt and credit agreements.~~Notes to Consolidated Financial Statements for additional information.

We actively 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.

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OTHER MATTERS

Status of the F-35 Program

The F-35 program primarily consists of production contracts, sustainment activities, and new development efforts. Production of the aircraft is expected to continue for many years given the U.S. Government’s ~~current inventory~~ objective of 2,456 aircraft for the U.S. Air Force, U.S. Marine Corps, and U.S. Navy; commitments from our seven international partner countries and ~~nine~~ten Foreign Military Sales (FMS) customers; as well as interest from other countries.

We continue to see strong international demand for the F-35. ~~The Government~~In December 2023, the Republic of ~~Canada~~Korea announced init signed a follow-on Letter of offer and acceptance (LOA) for 20 additional F-35s, increasing its program of record from 40 to 60. In January ~~2023 their commitment~~2024, the Czech Republic signed a LOA to ~~purchase 88 F-35 aircraft.~~procure 24 F-35s and the U.S. Department of State approved a potential Foreign Military Sale to Greece for up to 40 F-35s. In February ~~2023, the government of~~2024, Singapore announced its intent to ~~exercise an option~~purchase eight F-35As to ~~purchase an additional eight F-35 aircraft, increasing its total quantity~~complement the 12 F-35Bs to ~~12. In March of 2023, the government of South Korea announced approval to purchase an additional 20 F-35 aircraft, increasing its total quantity to 60.~~which it has previously committed.

During the first quarter of 2023, we delivered five aircraft and had a backlog of 340 aircraft. Deliveries in the quarter were impacted by an issue with the Government Furnished Equipment (GFE) engine that occurred at the end of 2022 and resulted in a pause in flight operations, which prevented aircraft deliveries until flight operations and deliveries resumed in March 2023. We currently expect that we will deliver fewer than the prior plan of 147-153 aircraft in 2023 due to both software maturation related to the Technology Refresh 3 (TR-3) configuration and hardware delivery timing; we will provide an updated range pending the results of future flight tests. Despite the change in the delivery range, currently we do not expect a material impact to our 2023 financial outlook. Since program inception through ~~the first quarter of 2023,~~March 31, 2024, we have delivered ~~899~~992 production F-35 aircraft, ~~to U.S. and international customers,~~ including ~~652~~710 F-35A variants, ~~178~~197 F-35B variants and 6985 F-35C variants, demonstrating the F-35 program’s continued progress and longevity. Our backlog as of March 31, 2024 was 373 aircraft and our aircraft production rate remains at approximately 156 per year; however, we had no customer deliveries of aircraft in the first quarter of 2024. Deliveries of aircraft with Technology Refresh-3 (TR-3) capability remain on hold as the software is finalized. We continue to target a second quarter 2024 customer acceptance of a specific software configuration permitting deliveries of TR-3 aircraft and expect deliveries to begin in the third quarter 2024. Additionally, we remain focused on receiving the necessary hardware from our suppliers to deliver this critical combat capability for the F-35.

Given the size and complexity of the F-35 program, we anticipate ~~that there will be~~ continual reviews ~~related to~~on aircraft performance, program and delivery schedule, cost and requirements as part of the DoD, Congressional and international countries’ oversight and budgeting processes. ~~Current program challenges~~Areas of focus include ~~our~~Lockheed Martin’s and our suppliers’ performance, ~~(including COVID-19 performance-related challenges),~~ software development (including, in particular, software maturation related to TR-3 capability), and flight test execution and related findings. Additional areas of ~~future flight tests and findings resulting from testing and operating the aircraft,~~focus include the level of cost associated with life cycle operations, sustainment and potential contractual obligations, inflation-related cost pressures, and the ability to ~~improve~~increase affordability.

Contingencies

See “Note 7 - Legal Proceedings and Contingencies” included in our Notes to Consolidated Financial Statements for information regarding our contingent obligations, including off-balance sheet arrangements.

Critical Accounting Policies

There have been no significant changes to the critical accounting policies disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2022~~2023 Form 10-K.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

As disclosed in “Item 7A, Quantitative and Qualitative Disclosures About Market Risk” of our ~~2022~~2023 Form 10-K, we transact business globally and are subject to risks associated with changing foreign currency exchange rates. We enter into foreign currency hedges such as forward and option contracts that change in value as foreign currency exchange rates change. Our exposures to market risk have not changed materially since December 31, ~~2022.~~2023. See “Note 8 - Fair Value Measurements” included in our Notes to Consolidated Financial Statements for additional discussion.

ITEM 4. Controls and Procedures

We performed an evaluation of the effectiveness of our disclosure controls and procedures as of March ~~26, 2023.~~31, 2024. The evaluation was performed with the participation of senior management of each business segment and key corporate functions, under the supervision of the Chief Executive Officer (CEO) and Chief Financial Officer (CFO). Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were operating and effective as of March ~~26, 2023.~~31, 2024.

There were no changes in our internal control over financial reporting during the quarter ended March ~~26, 2023~~31, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Forward-Looking Statements

This Form 10-Q contains statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements within the meaning of the federal securities laws, and are based on our current expectations and assumptions. The words “believe,” “estimate,” “anticipate,” “project,” “intend,” “expect,” “plan,” “outlook,” “scheduled,” “forecast” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially due to factors such as:

•our reliance on contracts with the U.S. Government, which are dependent on U.S. Government funding and can be terminated for convenience, and our ability to negotiate favorable contract terms;

•budget uncertainty, the risk of future budget cuts, the impact of continuing resolution funding mechanisms and the debt ceiling and the potential for government shutdowns and changing funding and acquisition priorities;

•~~our reliance on contracts with the U.S. Government, which are dependent on U.S. Government funding and can be terminated for convenience, and our ability to negotiate favorable contract terms;~~

•risks related to the development, production, sustainment, performance, schedule, cost and requirements of complex and technologically advanced programs, including the F-35 program;

•planned production rates and orders for significant programs, compliance with stringent performance and reliability standards, and materials availability, including government furnished equipment;

•the timing of contract awards or delays in contract definitization as well as the timing and customer acceptance of product deliveries and performance milestones;

•our ability to recover costs under U.S. Government contracts and the mix of fixed-price and cost-reimbursable contracts;

•customer procurement policies that shift risk to contractors, including competitively bid programs with fixed-price development work or follow-on production options or other financial risks; and the impact of investments, cost overruns or other cost pressures and performance issues on fixed price contracts;

•changes in procurement and other regulations and policies affecting our industry, export of our products, cost allowability or recovery, preferred contract type, and performance and progress payments policy;

•performance and financial viability of key suppliers, teammates, joint ventures (including United Launch Alliance), joint venture partners, subcontractors and customers;

• economic, industry, business and political conditions including their effects on governmental policy;

•the impact of inflation and other cost pressures;

•the impact of ~~COVID-19 or future~~pandemics and epidemics on our business and financial results, including supply chain disruptions and delays, employee absences, and program delays;

• government actions that ~~disrupt our supply chain or~~ prevent the sale or delivery of our products (such as delays in approvals for exports requiring Congressional notification);

• trade policies or sanctions (including Chinese sanctions on us or our suppliers, teammates or partners, U.S. Government sanctions on Türkish entities and persons, and ~~potential~~ indirect effects of sanctions on Russia to our supply chain);

• our success expanding into and doing business in adjacent markets and internationally and the risks posed by international sales;

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• changes in foreign national priorities and foreign government budgets and planned orders, including potential effects from fluctuations in currency exchange rates;

• the competitive environment for our products and services, including competition from startups and non-traditional defense contractors;

• our ability to develop and commercialize new technologies and products, including emerging digital and network technologies and capabilities;

•our ability to benefit fully from or adequately protect our intellectual property rights;

• our ability to attract and retain a highly skilled workforce, the impact of work stoppages or other labor disruptions;

• cyber or other security threats or other disruptions faced by us or our suppliers;

• our ability to implement and continue, and the timing and impact of, capitalization changes such as share repurchases, dividend payments and financing transactions;

• the accuracy of our estimates and projections;

• ~~the impact of pension risk transfers, including potential noncash settlement charges, timing and estimates regarding pension funding and movements~~changes in ~~interest rates and other changes that may affect~~ pension plan assumptions ~~stockholders’ equity, the level of the FAS/CAS adjustment,~~ and actual returns on pension ~~plan~~ assets; cash funding requirements and pension risk transfers and associated settlement charges;

• realizing the anticipated benefits of acquisitions or divestitures, investments, joint ventures, teaming arrangements or internal reorganizations, and market volatility affecting the fair value of investments that are marked to market;

• our efforts to increase the efficiency of our operations and improve the affordability of our products and services, including through digital transformation and cost reduction initiatives;

• the risk of an impairment of our assets, including the potential impairment of goodwill ~~recorded at the Sikorsky line of business;~~

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and intangibles;

• the availability and adequacy of our insurance and indemnities;

• impacts of climate change and compliance with laws, regulations, policies, and customer requirements in response to climate change concerns;

• changes in accounting, U.S. or foreign tax, export or other laws, regulations, and policies and their interpretation or application, and changes in the amount or reevaluation of uncertain tax positions; and

•the outcome of legal proceedings, bid protests, environmental remediation efforts, audits, government investigations or government allegations that we ~~have~~has failed to comply with law, other contingencies and U.S. Government identification of deficiencies in our business systems.

These are only some of the factors that may affect the forward-looking statements contained in this Form 10-Q. For a discussion identifying additional important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, see our filings with the U.S. Securities and Exchange Commission (SEC) including, but not limited to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 and subsequent Quarterly Reports on Form 10-Q. Our filings may be accessed through the Investor Relations page of our website, www.lockheedmartin.com/investor, or through the website maintained by the SEC at www.sec.gov.

Our actual financial results likely will be different from those projected due to the inherent nature of projections. Given these uncertainties, forward-looking statements should not be relied on in making investment decisions. The forward-looking statements contained in this Form 10-Q speak only as of the date of our filing. Except where required by applicable law, we expressly disclaim a duty to provide updates to forward-looking statements after the date of this Form 10-Q to reflect subsequent events, changed circumstances, changes in expectations, or the estimates and assumptions associated with them. The forward-looking statements in this Form 10-Q are intended to be subject to the safe harbor protection provided by the federal securities laws.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

We are subject to federal, state, local and foreign requirements for the protection of the environment, including those for discharge of hazardous materials and remediation of contaminated sites. Due in part to the complexity and

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pervasiveness of these requirements, we are a party to or have property subject to various lawsuits, proceedings and remediation obligations. The extent of our financial exposure cannot in all cases be reasonably estimated at this time.

For information regarding the matters discussed above, including current estimates of the amounts that we believe are required for remediation or clean-up to the extent estimable, see “Note 7 - Legal Proceedings and Contingencies” included in our Notes to Consolidated Financial Statements in this Form ~~10-Q.~~10-Q, which is hereby incorporated by reference. For additional information and a description of previously reported matters, see also “Critical Accounting Policies – Environmental Matters” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 14 – Legal Proceedings, Commitments and Contingencies,” in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 filed with the U.S. Securities and Exchange Commission.

ITEM 1A. Risk Factors

There have been no material changes to the risk factors disclosed in “Item 1A, Risk Factors” of our ~~2022~~2023 Form 10-K. These risks and uncertainties described in our risk factors have the potential to materially affect our business, results of operations, financial condition, cash flows, projected results and future prospects. These risks are not exclusive and additional risks to which we are subject include the factors mentioned under “Forward-Looking Statements” and the risks described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q.

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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no sales of unregistered equity securities during the quarter ended March ~~26, 2023.~~31, 2024.

The following table provides information about our repurchases of our common stock that is registered pursuant to Section 12 of the Securities Exchange Act of 1934 during the quarter ended March ~~26, 2023.~~31, 2024.
Period (a)
Total Number
of Shares
Purchased Average
Price Paid
Per Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced Plans
or Programs (b)
Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (b)
(in millions)
January 1, 2023 – January 29, 2023 — $ — — $ 10,023
January 30, 2023 – February 26, 2023 (c)
876,418 $ 479.27 868,452 $ 9,523
February 27, 2023 – March 26, 2023 (d)
251,388 $ 479.49 — $ 9,523
Total(c)(d)
1,127,806 $ 479.48 868,452


Period (a)	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)	Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (b)
					(in millions)
January 1, 2024 – January 28, 2024	—	$	—	—	$	10,023
January 29, 2024 – February 25, 2024	1,183,474	$	426.33	1,180,861	$	9,520
February 26, 2024 – March 31, 2024 (c)	1,404,974	$	434.34	1,141,334	$	9,023
Total (c)	2,588,448	$	430.68	2,322,195

(a)We close our books and records on the last Sunday of each month to align our financial closing with our business processes, except for the month of December, as our fiscal year ends on December 31. As a result, our fiscal months often differ from the calendar months. For example, ~~March 26, 2023~~February 25, 2024 was the last day of our ~~March 2023~~February 2024 fiscal month.

(b)In 2010, our Board of Directors approved a share repurchase program pursuant to which we are authorized to repurchase our common stock in privately negotiated transactions or in the open market at prices per share not exceeding the then-current market prices. From time to time, our Board of Directors authorizes increases to our share repurchase program. ~~On October 17, 2022, the Board of Directors authorized an increase to the program by $14.0 billion.~~ The total remaining authorization for future common share repurchases under our share repurchase program was ~~$9.5~~$9.0 billion as of March ~~26, 2023.~~31, 2024. Under the program, management has discretion to determine the dollar amount of shares to be repurchased and the timing of any repurchases in compliance with applicable law and regulation. This includes purchases pursuant to Rule 10b5-1 plans, including accelerated share repurchases. The program does not have an expiration date.

(c)During the quarter ended March 26, 2023, we entered into an accelerated share repurchase (ASR) agreement to purchase $500 million of our common stock. Under the terms of the ASR agreement, we paid $500 million and received an initial delivery of 868,452 shares of our common stock in February 2023. Upon final settlement of the ASR agreement in April 2023, we received an additional 184,437 shares of our common stock based on the average price paid per share of $474.88, calculated with reference to the volume-weighted average price (VWAP) of our common stock over the term of the agreement, less a negotiated discount. Average Price Paid Per Share in the table above does not include ASR shares.

~~(d)During the quarter ended March 26, 2023,~~31, 2024, the total number of shares purchased included ~~259,354~~266,253 shares that were transferred to us by employees in satisfaction of tax withholding obligations associated with the vesting of restricted stock units and performance stock units. These purchases were made pursuant to a separate authorization by our Board of Directors and are not included within the program.

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ITEM 5. Other Information

None of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarter ended March 31, 2024.

ITEM 6. Exhibits


Exhibit No.						Description


~~3.1~~						Bylaws of Lockheed Martin Corporation, as amended and restated effective February 22, 2023 (incorporated by reference to Exhibit 3.1 to Lockheed Martin Corporation's Current Report on Form 8-K filed with the SEC on February 23, 2023)

10.1						Form of ~~2023~~2024 Annual Restricted Stock Unit Award Agreement under the Lockheed Martin Corporation 2020 Incentive Performance Award Plan

10.2						Form of Performance Stock Unit Award Agreement ~~(2023~~(2024 - ~~2025~~2026 Performance Period) under the Lockheed Martin Corporation 2020 Incentive Performance Award Plan

10.3						Form of Long Term Incentive Performance Award Agreement ~~(2023~~(2024 - ~~2025~~2026 Performance Period) under the Lockheed Martin Corporation 2020 Incentive Performance Award Plan

~~10.4~~						~~Amendment to Outstanding Long-Term Incentive Performance and Performance Stock Unit Award Agreements (effective February 22, 2023)~~

~~10.5~~						~~Lockheed Martin Corporation 2021 Management Incentive Compensation Plan, amended and restated effective January 1, 2023~~

15						Acknowledgment of Independent Registered Public Accounting Firm

31.1						Certification of James D. Taiclet pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of Jesus Malave pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32						Certification of James D. Taiclet and Jesus Malave pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document contained in Exhibit 101

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						Lockheed Martin Corporation
						(Registrant)

Date: April ~~18, 2023~~23, 2024						By: /s/ H. Edward Paul III
						H. Edward Paul III
						Vice President and Controller
						(Duly Authorized Officer and Chief Accounting Officer)

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	Quarters Ended (a)
		March 26, 2023				March 27, 2022
Cost of sales – products			$	(11,151)			$	(11,107)
% of product sales			89.0		%		88.9		%
Cost of sales – services			(2,284)				(2,167)
% of service sales			87.8		%		87.7		%

Other unallocated, net			355				219
Total cost of sales			$	(13,080)			$	(13,055)