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What changed in Lockheed Martin's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Lockheed Martin's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+438 added−450 removedSource: 10-K (2025-01-28) vs 10-K (2024-01-23)

Top changes in Lockheed Martin's 2024 10-K

438 paragraphs added · 450 removed · 359 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur human capital management strategy, which we refer to as our people strategy, is tightly aligned with our business needs and technology strategy. During 2023, our human capital efforts were focused on continuing to accelerate the transformation of our technology for workforce management through investments in upgraded systems and processes.
Biggest changeOur human capital management strategy, which we refer to as our people strategy, tightly aligns to our business needs and technology strategy and focused in 2024 on continuing to accelerate the transformation of our technology for workforce management through investments in upgraded systems and processes, increasing our ability to meet the quickly changing needs of our business, and maintaining a working environment and culture that is supportive of all employees and reflects our core value of “Respect Others.” We structure our people strategy and its implementation to comply with the laws and regulations to which we are subject as a federal government contractor.
Research and Development We conduct research and development (R&D) activities using our own funds (referred to as company-funded R&D or independent research and development (IR&D)) and under contractual arrangements with our customers (referred to as customer-funded R&D) to enhance existing products and services and to develop future technologies.
Research and Development We conduct research and development (R&D) activities using our own funds (referred to as company-funded or independent R&D (IR&D)) and under contractual arrangements with our customers (referred to as customer-funded R&D) to enhance existing products and services and to develop future technologies.
Human Capital Resources Due to the specialized nature of our business, our performance depends on identifying, attracting, developing, motivating and retaining a highly skilled workforce with the requisite skills and, in many cases, security clearances, in multiple areas, including engineering, science, manufacturing, information technology, cybersecurity, business development and strategy and management.
Human Capital Due to the specialized nature of our business, our performance depends on identifying, attracting, developing, motivating and retaining a highly skilled workforce with the requisite skills and, in many cases, security clearances, in multiple areas, including engineering, science, manufacturing, information technology, cybersecurity, business development and strategy and management.
We have a hybrid workforce model that encourages flexible working arrangements for employees and teams who can meet our customer commitments remotely, which has helped recruit and retain talent. In addition, we invest in the development of our employees through training, apprenticeship programs, security clearance sponsorship, leadership development plans and offering tuition assistance programs for continuing education or industry certifications.
We have a hybrid workforce model that enables flexible working arrangements for employees and teams who can meet our customer commitments remotely, which has helped recruit and retain talent. In addition, we invest in the development of our employees through training, apprenticeship programs, security clearance sponsorship, leadership development plans and offering tuition assistance programs for continuing education or industry certifications.
Other Applicable Regulations Our businesses and operations are subject to both U.S. and non-U.S. government laws, regulations and procurement policies and practices, including regulations relating to product testing, import-export controls, technology transfer restrictions, foreign investment, tariffs, taxation, repatriation of earnings, sanctions, exchange controls, the Foreign Corrupt Practices Act and other anti-corruption laws and anti-boycott provisions of the U.S.
Other Applicable Regulations Our business and operations are subject to both U.S. and non-U.S. government laws, regulations and procurement policies and practices, including regulations relating to product testing, import-export controls, technology transfer restrictions, foreign investment, tariffs, taxation, repatriation of earnings, sanctions, exchange controls, the Foreign Corrupt Practices Act and other anti-corruption laws and anti-boycott provisions of the U.S.
A number of our existing collective bargaining agreements expire in any given year. Historically, we have been successful in renegotiating expiring agreements without any material disruption of operating activities, and management considers employee and union relations to be good. This has continued to be the case in 2023.
A number of our existing collective bargaining agreements expire in any given year. Historically, we have been successful in renegotiating expiring agreements without any material disruption of operating activities, and management considers employee and union relations to be good. This has continued to be the case in 2024.
ITEM 1. Business General We are a global security and aerospace company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. We also provide a broad range of management, engineering, technical, scientific, logistics, system integration and cybersecurity services.
ITEM 1. Business General We are a global aerospace and defense company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. We also provide a broad range of management, engineering, technical, scientific, logistics, system integration and cybersecurity services.
Government’s power to unilaterally definitize a contract can affect our ability to negotiate mutually agreeable contract terms and, if a contract is unilaterally imposed upon us, it may negatively affect our expected profit and cash flows on a program or impose burdensome terms. 8 Table of Contents Classified Contracts A portion of our business is classified by the U.S.
Government’s power to unilaterally definitize a contract can affect our ability to negotiate mutually agreeable contract terms and, if a contract is unilaterally imposed upon us, it may negatively affect our expected profit and cash flows on a program or impose burdensome terms. Classified Contracts A portion of our business is classified by the U.S.
Missiles and Fire Control MFC provides air and missile defense systems; tactical missiles and air-to-ground precision strike weapon systems; logistics; fire control systems; mission operations support, readiness, engineering support and integration services; manned and unmanned ground vehicles; and energy management solutions. MFC also has contracts with the U.S. Government for various classified programs.
Missiles and Fire Control MFC provides air and missile defense systems; tactical missiles and precision strike weapon systems; logistics; fire control systems; mission operations support, readiness, engineering support and integration services; ground vehicles; and energy management solutions. MFC also has contracts with the U.S. Government for various classified programs.
Our internal controls addressing the financial reporting of classified contracts are consistent with our internal controls for our non-classified contracts. Commercial Aircraft Our commercial aircraft products are required to comply with U.S. and international regulations governing production and quality systems, airworthiness and installation approvals, repair procedures and continuing operational safety.
Our internal controls addressing the financial reporting of classified contracts are consistent with our internal controls for our non-classified contracts. 8 Table of Contents Commercial Aircraft Our commercial aircraft products are required to comply with U.S. and international regulations governing production and quality systems, airworthiness and installation approvals, repair procedures and continuing operational safety.
It is common for international customers to require contractors to comply with their industrial cooperation regulations, sometimes referred to as offset requirements, and we have entered into foreign offset agreements as part of securing 7 Table of Contents some international business.
It is common for international customers to require contractors to comply with their industrial cooperation regulations, sometimes referred to as offset requirements, and we have entered into foreign offset agreements as part of securing some international business.
For information on the risks related to our human capital resources, see Item 1A - Risk Factors. Competition We compete with many different companies in the defense and aerospace industry. The Boeing Company, General Dynamics, L3Harris Technologies, Northrop Grumman, and RTX Corporation are some of our primary competitors.
For information on the risks related to our human capital resources, see Item 1A – Risk Factors. Competition We compete with many different companies both within and outside of the defense and aerospace industry. The Boeing Company, General Dynamics, L3Harris Technologies, Northrop Grumman, and RTX Corporation are some of our primary competitors.
The forward-looking statements in this Form 10-K are intended to be subject to the safe harbor protection provided by the federal securities laws.
The forward-looking statements in this Form 10-K are intended to be subject to the safe harbor protections provided by the federal securities laws.
Our vision for 21st Century Security is to accelerate the adoption of advanced networking and leading-edge technologies into our national defense enterprise, while enhancing the performance and value of our platforms and products for our customers.
Our 21st Century Security ® vision is to accelerate the adoption of advanced networking and other leading-edge technologies into the American defense enterprise, while enhancing the performance and value of our platforms and products for our customers.
Rotary and Mission Systems RMS designs, manufactures, services and supports various military and commercial helicopters, surface ships, sea and land-based missile defense systems, radar systems, laser systems, sea and air-based mission and combat systems, command and control mission solutions, cyber solutions, and simulation and training solutions. RMS also has contracts with the U.S. Government for various classified programs.
Rotary and Mission Systems RMS designs, manufactures, services and supports various military and commercial helicopters, sea- and land-based missile defense systems, radar systems, laser systems, sea- and air-based mission and combat systems, command and control mission solutions, cyber solutions, simulation and training solutions, and services and supports surface ships. RMS also has contracts with the U.S.
These and future laws, regulations or policies in response to concerns over GHG emissions such as carbon taxes, mandatory reporting and disclosure obligations, including environmental requirements for certain federal contractors and subcontractors and the SEC’s proposed climate-related disclosure rule, and changes in procurement policies, including the use of environmental goals in proposal evaluation, could significantly increase our operational and compliance burdens and costs.
These and future laws, regulations or policies in response to concerns over GHG emissions such as carbon taxes, mandatory reporting and disclosure obligations, including environmental requirements for certain federal contractors and subcontractors, and changes in procurement policies, including the use of environmental goals in proposal evaluation, could significantly increase our operational and compliance burdens and costs.
Key to enabling success of our strategy is developing differentiating technologies, forging strategic partnerships, including with commercial companies, executing on our multi-year business transformation initiative to enhance our digital infrastructure and increase efficiencies and collaboration throughout our business and maintaining fiscal discipline. Underpinning our ability to execute our strategy is our talent and culture.
Keys to enabling success of our strategy include developing and investing in differentiating technologies, forging strategic partnerships, including with commercial companies, executing on our multi-year business transformation initiative to enhance our digital infrastructure and increase efficiencies and collaboration throughout our business and maintaining fiscal discipline. Underpinning our ability to execute our strategy is our talent and culture.
Critical to attracting and retaining top talent is employee satisfaction, and we regularly conduct employee engagement surveys to gauge employee satisfaction and to understand the effectiveness of our people strategy and assess employee’s intent to stay.
Employee satisfaction is essential to attracting and retaining top talent, and we regularly conduct employee engagement surveys to gauge employee satisfaction and to understand the effectiveness of our people strategy and assess employees’ intent to stay.
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. We operate in a complex and evolving global security environment.
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.
Although the extent of our financial exposure cannot in all cases be reasonably estimated, the costs of environmental compliance have not had, and we do not expect that these costs will have, a material adverse effect on our earnings, financial position and cash flow, primarily because substantially all of our environmental costs are allowable in establishing the price of our products and services under our contracts with the U.S.
Although the extent of our financial exposure cannot in all cases be reasonably estimated, the costs of environmental compliance have not had, and we do not expect that these costs will have, a material adverse effect on our financial condition or results of operations, primarily because substantially all of our environmental costs are allowable in establishing the price of our products and services under our contracts with the U.S.
Workforce Demographics As of December 31, 2023, we had a highly skilled workforce made up of approximately 122,000 employees, including approximately 65,000 engineers, scientists and information technology professionals. As of December 31, 2023, approximately 93% of our workforce was located in the U.S. and approximately 19% of our employees were covered by collective bargaining agreements with various unions.
As of December 31, 2024, we had a highly skilled workforce made up of approximately 121,000 employees, including approximately 70,000 engineers, scientists and information technology professionals. As of December 31, 2024, approximately 93% of our workforce was located in the U.S. and approximately 19% of our employees were covered by collective bargaining agreements with various unions.
We make our website content available for information purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Annual Report on Form 10-K (Form 10-K). 9 Table of Contents Throughout this Form 10-K, we incorporate by reference information from parts of other documents filed with the U.S.
We make our website content available for information purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Annual Report on Form 10-K (Form 10-K). Throughout this Form 10-K, we incorporate by reference information from parts of other documents filed with the U.S. Securities and Exchange Commission (SEC).
Navy and international customers and is also a sea and land-based element of the U.S. missile defense system, and the Littoral Combat Ship (LCS) and Multi-Mission Surface Combatant (MMSC) 4 Table of Contents programs to provide surface combatant ships for the U.S.
Navy and international customers and are also a sea and land-based element of the U.S. missile defense system, and the Littoral Combat Ship (LCS), Multi-Mission Surface Combatant (MMSC), and Canadian Surface Combatant (CSC) programs to provide surface combatant ships for the U.S.
We have multiple programs of record from each business segment that are entering growth stages, including the F-35 sustainment activity (Aeronautics); increased Patriot Advanced Capability-3 (PAC-3) production rates and increased demand for High Mobility Artillery Rocket System (HIMARS ® ) and Guided Multiple Launch Rocket Systems (GMLRS) (Missiles and Fire Control); radar surveillance systems and CH-53K King Stallion heavy lift helicopter (Rotary and Mission Systems); and the modernization and enhancements to the Trident II D5 Fleet Ballistic Missile (FBM) (Space).
We have well established programs across our business segments that continue to experience growth, including F-35 sustainment activity (Aeronautics); increased Patriot Advanced Capability-3 (PAC-3) production rates and increased demand for High Mobility Artillery Rocket System (HIMARS ® ) and Guided Multiple Launch Rocket Systems (GMLRS) (Missiles and Fire Control); radar surveillance systems and CH-53K King Stallion heavy lift helicopter (Rotary and Mission Systems); and the modernization of and enhancements to the Trident II D5 Fleet Ballistic Missile (FBM) (Space).
Securities and Exchange Commission (SEC). The SEC allows us to disclose important information by referring to it in this manner.
The SEC allows us to disclose important information by referring to it in this manner.
RMS’ major programs include: • Sikorsky helicopter programs such as those related to the BLACK HAWK ® , Seahawk ® and CH-53K King Stallion heavy lift helicopters which are in service with U.S. and foreign governments, the Combat Rescue Helicopter (CRH) utilized by the U.S. Air Force, and the VH-92A helicopter for the U.S.
Government for various classified programs. RMS’ major programs include: • Sikorsky helicopter programs such as those related to the Black Hawk, Seahawk ® and CH-53K King Stallion heavy lift helicopters, which are in service with U.S. and foreign governments, the Combat Rescue Helicopter (CRH) utilized by the 4 Table of Contents U.S.
Space Force. • Hypersonics programs, which include several programs with the U.S. Army and U.S. Navy to design, develop and build hypersonic strike weapons. • The Transport Layer program, a small satellite program designed to support resilient space communications for the Space Development Agency.
Space Force. • Hypersonics programs, which include several programs with the U.S. Army and U.S. Navy to design, develop and build hypersonic strike weapons. • The Transport Layer programs, small satellite capabilities to support proliferated space constellations and early warning communications for the Space Development Agency.
These statements are not guarantees of future performance and are subject to risks and uncertainties. Statements and assumptions with respect to future sales, income and cash flows, growth, program performance, the outcome of litigation, anticipated pension cost and funding, environmental remediation cost estimates, planned acquisitions or dispositions of assets, or the anticipated consequences are examples of forward-looking statements.
Statements and assumptions with respect to future sales, income and cash flows, growth, program performance, the outcome of litigation, anticipated pension costs and funding, environmental remediation cost estimates, planned acquisitions or dispositions of assets, future regulatory, economic or geopolitical changes, or the anticipated consequences thereof are examples of forward-looking statements.
We continue working to minimize the impact of supply chain challenges on us but many of the challenges are industry wide or caused by geopolitical events and general economic conditions that are outside of our control. These supplier disruptions have resulted in delays and increased costs and have adversely affected our program performance and operating results.
However, many of the challenges are industry wide or caused by geopolitical events and general economic conditions that are outside of our control. These supplier disruptions have resulted in delays and increased costs and have adversely affected our program performance and operating results. These dynamics are expected to continue in 2025.
Although long-term agreements have historically helped enable a continued supply of these materials, the lingering effects of the COVID-19 pandemic, supply chain challenges, supplier disputes, regulatory restrictions, and inflationary pressures have caused certain parts’ shortages, extended lead times and pricing escalations affecting certain sources of supply.
Although long-term agreements have historically helped enable a continued supply of these materials, supply chain challenges, supplier disputes, regulatory restrictions, and inflationary pressures have caused certain parts’ shortages, extended lead times and pricing escalations affecting certain sources of supply. We are working with U.S.
Sustainment provides logistics 3 Table of Contents and training support for the aircraft delivered to F-35 customers. For additional information on the F-35 program, see “Status of the F‑35 Program” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. See also Item 1A - Risk Factors for a discussion of risks related to the F-35 program.
For additional information on the F-35 program, see “Status of the F‑35 Program” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. See also Item 1A - Risk Factors for a discussion of risks related to the F-35 program.
The aim of 21st Century Security is to integrate new and existing systems across all domains with advanced, open-architecture networking and operational technologies to make defense forces more agile, adaptive and unpredictable. Twenty-first Century Security is an overarching vision that guides our investment and strategy.
The aim of 21st Century Security is to integrate and continuously upgrade new and existing systems across all domains with advanced, open-architecture networking and operational technologies that make defense forces more agile, adaptive and unpredictable, enabling overmatch and strengthening deterrence today and into the future. 21st Century Security guides our strategy and investments.
It is not unusual to compete for a contract award with a peer company and, simultaneously, perform as a supplier to or a customer of that same competitor on other contracts.
Additionally, a company competing to be a prime contractor may, upon ultimate award of the contract to another competitor, serve as a subcontractor to the ultimate prime contracting company. It is not unusual to compete for a contract award with a peer company and, simultaneously, perform as a supplier to or a customer of that same competitor on other contracts.
Finally, we are always in pursuit of new program awards to develop future platforms that enable us to continue to place security capability into the market and expand our global reach.
Finally, we are always in pursuit of new program awards to develop future platforms that enable us to continue to strengthen our national defense and advance deterrence and global security.
Marine One transport mission. • Integrated warfare systems and sensors (IWSS) programs such as Aegis Combat System (Aegis) programs that serve as an air and missile defense system for the U.S.
Air Force, and the VH-92A helicopter for the U.S. Marine One transport mission, Presidential helicopter, of which we made the final aircraft delivery under the program in 2024. • Integrated warfare systems and sensors (IWSS) programs such as Aegis Combat System (Aegis) programs that serve as an air and missile defense system for the U.S.
Government Contracts We must comply with, and are affected by, laws and regulations relating to the formation, administration and performance of U.S. Government and other governments’ contracts, including foreign governments.
Government, or as a direct sale with the foreign government authority, which regulates these sales in a manner similar to the U.S. Government. 7 Table of Contents Government Contracts We must comply with, and are affected by, laws and regulations relating to the formation, administration and performance of U.S. Government and other governments’ contracts, including foreign governments.
Government agencies and entities, principally all branches of the U.S. military and NASA. We also contract with similar government authorities in other countries, either under the foreign military sales (FMS) program, contracted through the U.S. Government, or as a direct sale with the foreign government authority, which regulates these sales in a manner similar to the U.S. Government.
Regulatory Matters Our business is heavily regulated. We contract with numerous U.S. Government agencies and entities, principally all branches of the U.S. military and NASA. We also contract with similar government authorities in other countries, either under the foreign military sales (FMS) program, contracted through the U.S.
Technological advances in such areas as additive manufacturing, data analytics, digital engineering, artificial intelligence, advanced materials, autonomy and robotics, and new business models such as commercial access to space, are enabling new factors of competition for both traditional and non-traditional competitors. Regulatory Matters Our business is heavily regulated. We contract with numerous U.S.
Technological advances in such areas as additive manufacturing, data analytics, digital engineering, artificial intelligence, advanced materials, autonomy and robotics, and new business models such as commercial access to space, are enabling new factors of competition for both traditional and non-traditional competitors. For more information on the risks related to new technologies, see Item 1A - Risk Factors.
Aeronautics’ major programs include: • F-35 Lightning II - international multi-role, multi-variant, fifth generation stealth fighter; • C-130 Hercules - international tactical airlifter; • F-16 Fighting Falcon - combat-proven, international multi-role fighter; and • F-22 Raptor - air dominance and multi-role fifth generation stealth fighter.
Aeronautics’ major programs include: • F-35 Lightning II – international multi-role, multi-variant, fifth generation stealth fighter. • C-130 Hercules – international tactical airlifter. • F-16 Fighting Falcon – combat-proven, international multi-role fighter. • F-22 Raptor – air dominance and multi-role fifth generation stealth fighter. 3 Table of Contents The F-35 program is our largest program, generating 26% of our total consolidated net sales, as well as 65% of Aeronautics’ net sales in 2024.
An integral part of our people strategy is early career hiring through college and intern pipelines, particularly in technical fields and critical skills areas. During the 2022-2023 academic year, we hired a record 6,000 college hires and interns.
We strive to hire, develop and retain the top talent in the industry. During 2024, we hired nearly 9,200 employees and we hired 3,900 college hires and interns during the 2023-24 academic year. An integral part of our people strategy is early career hiring through college and intern pipelines, particularly in technical fields and critical skills areas.
We rely on other companies to provide materials, components and products and to perform a portion of 5 Table of Contents the services that are provided to our customers under the terms of most of our contracts.
Other important materials and components, on which certain of our products rely, include aluminum, titanium, specialty steel, carbon fiber and advanced microelectronics, such as semiconductors. We rely on other companies to provide materials, components and products and to perform a portion of the services that are provided to our customers under the terms of most of our contracts.
Various factors, however, can affect the distribution of our sales between accounting periods, including the timing of government awards, the availability of government funding, product deliveries and customer acceptance.
For more information on the risks related to our suppliers and raw materials, see Item 1A - Risk Factors. No material portion of our business is considered to be seasonal. Various factors, however, can affect the distribution of our sales between accounting periods, including the timing of government awards, the availability of government funding, product deliveries and customer acceptance.
The F-35 program is our largest program, generating 26% of our total consolidated net sales, as well as 64% of Aeronautics’ net sales in 2023. The F-35 program consists of multiple development, production and sustainment contracts. Development is focused on modernization of F-35’s capability and addressing emerging threats.
The F-35 program consists of multiple development, production and sustainment contracts. Development is focused on modernization of F-35’s capability and addressing emerging threats. Sustainment provides logistics and training support for the aircraft delivered to F-35 customers.
We believe this employee development makes us more competitive and also assists with leadership succession planning throughout the corporation. Employee Safety and Health Through our safety and health program we seek to optimize our operations with targeted safety, health and wellness opportunities designed to provide safe work conditions, and a healthy work environment, promote workforce resiliency and enhance business value.
In addition to efforts focused on recruitment and retention, we also monitor employee attrition across our employee population and take action based on the insights we gain from that monitoring process. 6 Table of Contents Employee Safety and Health Through our safety and health program we seek to optimize our operations with targeted safety, health and wellness opportunities designed to provide safe work conditions and a healthy work environment, promote workforce resiliency and enhance business value.
Forward-Looking Statements This Form 10-K 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.
The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including Lockheed Martin Corporation. 9 Table of Contents Forward-Looking Statements This Form 10-K 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.
R&D costs include basic research, applied research, concept formulation studies, design, development, and related test activities. See “Note 1 – Organization and Significant Accounting Policies” (under the caption “Research and development and similar costs”) included in our Notes to Consolidated Financial Statements.
R&D costs include basic research, applied research, concept formulation studies, design, development, and related test activities.
In addition, copies of our annual report will be made available, free of charge, upon written request. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including Lockheed Martin Corporation.
In addition, copies of our annual report will be made available, free of charge, upon written request.
We often collaborate with our competitors through teaming arrangements in efforts to provide our customers with the best mix of capabilities to address specific requirements. Additionally, a company competing to be a prime contractor may, upon ultimate award of the contract to another competitor, serve as a subcontractor to the ultimate prime contracting company.
We often collaborate with our competitors through teaming arrangements in efforts to provide our customers with the best mix of capabilities to address specific requirements, such as our recently announced strategic teaming agreement with General Dynamics to produce solid rocket motors, enhancing security and resilience in a critical domestic supply chain.
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Our strategy consists of the design and development of platforms and systems that meet the current needs of our customers and the future requirements of 21st Century Security.
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As our growth pillars continue to evolve, we are focusing on advancing all-domain mission solutions through investments in digital technologies such as Artificial Intelligence (AI)/Machine Learning (ML), Autonomy and Crewed/Uncrewed Teaming, Generative Design and other technologies and capabilities enabling Combined Joint All-Domain Command and Control (CJADC2).
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We are also focused on four elements for potential growth in the near to mid-term: current programs of record, classified programs, hypersonics and new awards.
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Innovations in these areas will expand capability, improve interoperability, increase demand for our multi-domain solutions and drive efficient conversion of backlog into growth across our portfolio.
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We are engaged in significant classified development programs and pending successful achievement of the objectives within those programs, we expect to begin the transition from development to production over the next few years.
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Additionally, our teams continue to transform our products and rapidly innovate for the future, developing 6th generation air dominance technologies within Skunk Works ® , demonstrating autonomous capabilities with the X-62A (F-16) and optionally piloted BLACK HAWK ® , creating new Joint All-Domain Operating systems with Defense of Guam and AIR 6500 in Australia, establishing small-to-medium satellite capabilities to support proliferated space constellations and advancing hypersonic capabilities.
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We are currently performing on multiple hypersonics programs and following the successful completion of ongoing testing and evaluation activity, multiple programs are expected to enter early production phases through 2026.
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See “Note 1 – Organization and Significant Accounting Policies” (under the caption “Research and development and similar costs”) included in our Notes to Consolidated Financial Statements. 5 Table of Contents Raw Materials, Suppliers and Seasonality Some of our products require relatively scarce raw materials, such as rare earth minerals.
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Raw Materials, Suppliers and Seasonality Some of our products require relatively scarce raw materials, such as rare earth minerals. Other important materials and components, on which certain of our products rely, include aluminum, titanium, carbon fiber and advanced microelectronics, such as semiconductors.
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Government, customers and suppliers on phase-in of regulatory requirements for transitioning the supply chains for rare earth minerals and magnets to secure and compliant sources.
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These dynamics are expected to continue in 2024. For more information on the risks related to our suppliers and raw materials, see Item 1A - Risk Factors. No material portion of our business is considered to be seasonal.
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The current availability of sources of supply meeting regulatory requirements and the ability to ensure compliance down to the mining level within the timeframes required by the regulations are challenges we continue to work with our multi-tier supplier base. At the same time, we are focused on minimizing the impact of these supply chain challenges on our programs.
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We also focused on increasing our ability to meet the quickly changing needs of the business, all while maintaining a respectful, supportive and inclusive working environment and culture.
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We seek to access the broadest possible pool of talent to enable us to meet our hiring needs, and we work to expand Lockheed Martin’s brand awareness and positioning as a best place to work.
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We use a variety of human capital measures in managing our business, including: workforce demographics and metrics in relation to representation, attrition, hiring, promotions and leadership; and talent management metrics, including retention rates of top talent.
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We believe this employee development makes us more competitive and assists with leadership succession planning throughout the company.
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Diversity and Inclusion Diversity and inclusion is a business imperative for us, as we believe that it is key to our future success.
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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.
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We have focused our diversity and inclusion initiatives on employee recruitment, including active engagement and outreach with minority-serving institutions, employee training and development, such as efforts focused on expanding the diverse talent pipeline, and employee engagement, including through participation in our Business Resource Groups.
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Our Business Resource Groups are voluntary, employee-led groups that are open to all employees while being aligned to demographic categories that we annually report on to the U.S. Government, including race/ethnicity, gender, disability and veteran status.
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The categories have been expanded to gain a deeper understanding of our workforce to include military service, sexual-orientation and gender identity which are not part of our annual government submission. The Business Resource Groups foster a diverse and inclusive workplace aligned with our organizational mission, values, goals and business practices and drive awareness and change within our organization.
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Through these and other focused efforts, including workforce availability, we have improved the diversity of our overall U.S. workforce and within leadership positions, specifically in the representation of women, people of color and people with disabilities. Additionally, veteran representation in our workforce remains outstanding, at almost four times the current annual national percentage of veterans in the civilian workforce.
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Employee Profile (as of December 31, 2023): Women (a) People of Color (a) Veterans (a) People with Disabilities (a) Overall 23% 32% 21% 12% Executives (b) 25% 17% 21% 13% (a) Based on employees who self-identify. Includes only U.S. employees and expatriates except for data relating to women, which also includes local country nationals.
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Excludes casual workers, interns/co-ops and employees of certain subsidiaries and joint ventures. (b) Executive is defined as director-level (one level below vice president) or higher. 6 Table of Contents Talent Acquisition, Retention and Development We strive to hire, develop and retain the top talent in the industry. During 2023, we hired nearly 15,000 employees.
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In addition to efforts focused on recruitment, we also monitor employee attrition across a broad array of categories and segments of the population, including with respect to diversity and top talent.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeGovernment guidance as it relates to sales to Taiwan and do not currently expect a material impact to our business from these actions. In 2023, China also implemented broad-based export restrictions on certain minerals used in the production, among other things, of semiconductors and missile systems.
Biggest changeChina has placed restrictions on and sanctioned our company and certain executives in connection with foreign military sales by the U.S. Government to Taiwan involving our products and services. We will continue to follow official U.S. Government guidance as it relates to sales to Taiwan and do not currently expect a material impact to our business from these actions.
Because of the significance of the judgments and estimation processes involved in accounting for our contracts, materially different amounts or revenue and operating profit could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes in underlying assumptions, circumstances or estimates may adversely affect our future financial condition and results of operations.
Because of the significance of the judgments and estimation processes involved in accounting for our contracts, materially different amounts of revenue and operating profit could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes in underlying assumptions, circumstances or estimates may adversely affect our future financial condition and results of operations.
Changes in government 21 Table of Contents procurement laws that mandate or take into account climate change considerations, such as the contractor’s GHG emissions, GHG emission reduction targets, lower emission products or other climate risks, in evaluating bids could result in costly changes to our operations or affect our competitiveness on future bids, or our ability to bid at all.
Changes in government procurement laws that mandate or take into account climate change considerations, such as the contractor’s GHG emissions, GHG emission reduction targets, lower emission products or other climate risks, in evaluating 21 Table of Contents bids could result in costly changes to our operations or affect our competitiveness on future bids, or our ability to bid at all.
A failure by our contracting parties to meet affordability targets could negatively affect our profitability, result in contract losses and affect our ability to win new business. Additionally, we are affected by government procurement restrictions and issues affecting industry supply chains broadly. For example, U.S. Government statutes and regulations impose restrictions in the sourcing of items from specified countries.
A failure by our contracting parties to meet affordability targets could negatively affect our profitability, result in contract losses and affect our ability to win new business. Additionally, we are affected by government procurement restrictions and issues affecting industry supply chains broadly. For example, U.S. Government statutes and regulations impose restrictions on the sourcing of items from specified countries.
If we fail in our development projects or if our new products or technologies fail to achieve customer acceptance or competitors develop more capable technologies or offerings, we may be unsuccessful in obtaining new contracts or winning all or a portion of next generation programs, including in key areas such as hypersonics and classified work, and this could adversely affect our future performance and financial results.
If we fail in our development projects or if our new products or technologies fail to achieve customer acceptance or competitors develop more capable technologies or offerings or develop new technologies or offerings faster, we may be unsuccessful in obtaining new contracts or winning all or a portion of next generation programs, including in key areas such as hypersonics and classified work, and this could adversely affect our future performance and financial results.
Our operating results are affected by the conduct and performance of businesses over which we do not exercise control and, as a result, we may not be successful in achieving the growth or other intended benefits of strategic investments. We make investments in early-stage companies that we believe are advancing or developing new technologies applicable to our businesses.
Our operating results are affected by the conduct and performance of businesses over which we do not exercise control and, as a result, we may not be successful in achieving the growth or other intended benefits of strategic investments. We make investments in early-stage companies that we believe are advancing or developing new technologies applicable to our business.
As an aerospace and defense company, we face a multitude of security threats, including cybersecurity threats ranging from attacks common to most industries, such as ransomware and denial-of-service, to attacks from more advanced and persistent, highly organized adversaries, including nation state actors, which target the defense industrial base and other critical infrastructure sectors.
As an aerospace and defense company, we face a multitude of security threats, including cybersecurity threats ranging from attacks common to most industries, such as ransomware and denial-of-service, to attacks from more advanced and persistent, highly organized adversaries, including nation state actors, some of which target the defense industrial base and other critical infrastructure sectors.
Moreover, depending on the severity of an incident, our customers’ data, our employees’ data, our intellectual property (including trade secrets and research, development and engineering know-how), and other third-party data (such as subcontractors, suppliers and vendors) could be compromised, which could adversely affect our business.
Moreover, depending on the severity of an incident, our customers’ data, our employees’ data, our intellectual property (including trade secrets and research, development and engineering know-how) and other third-party data (such as that of subcontractors, suppliers and vendors) could be compromised, which could adversely affect our business.
We are facing increased competition from startups and non-traditional defense contractors, which may have a lower cost structure or be able to move quickly in addition to being favored, in certain cases, by procurement policy.
We are facing increased competition from startups and non-traditional defense contractors, which may have a lower cost structure or be able to move more quickly in addition to being favored, in certain cases, by procurement policy.
For significant acquisitions we may use a one-year measurement period to analyze and assess several factors used in establishing the asset and liability fair values as of the acquisition date which could result in adjustments to asset and liability balances.
For acquisitions we may use a one-year measurement period to analyze and assess several factors used in establishing the asset and liability fair values as of the acquisition date which could result in adjustments to asset and liability balances.
In addition to cybersecurity threats, we face threats to the security of our facilities and employees from terrorist acts, sabotage or other disruptions, any of which could adversely affect our business.
In addition to cybersecurity threats, we face threats to the security of our facilities and employees from terrorist acts, sabotage and other disruptions, any of which could adversely affect our business.
Although under the majority of the GACs we have purchased we are relieved of all responsibility for the associated pension obligations, we have purchased and may in the future purchase GACs whereby the insurance company reimburses the pension plans but we remain responsible for paying benefits under the plans to covered retirees and beneficiaries and are subject to the risk that the insurance company will default on its obligations to reimburse the pension trusts.
Although under the majority of the GACs we have purchased, we are relieved of all responsibility for the associated pension obligations, we have purchased and may in the future purchase GACs whereby the insurance company reimburses the pension plans but we remain responsible for paying benefits under the plans to covered retirees and beneficiaries and are subject to the risk that the insurance company will default on its obligations to reimburse the pension trust.
Government has imposed certain sanctions on Türkish entities and persons, which has affected our ability to obtain certain U.S. export permits or authorizations necessary to perform under our existing contracts supporting the Türkish Utility Helicopter Program (TUHP), our work with Türkish industry and our opportunity for sales in Türkiye generally.
Government has imposed certain sanctions on Türkish entities and persons, which has affected our ability to obtain certain U.S. export permits or authorizations necessary to perform under our existing contracts supporting the Türkish Utility Helicopter Program (TUHP), and could impact our work with Türkish industry and our opportunity for sales in Türkiye generally.
See the Risk Factor “Geopolitical, macroeconomic and public health events and conditions could adversely affect our business, operating results, financial condition and cash flows.” Competition for international sales is intense, including from international manufacturers whose governments sometimes provide research and development assistance, marketing subsidies and other assistance for their products and services.
See the Risk Factor “Geopolitical, macroeconomic and public health events and conditions could adversely affect our business, financial condition and operating results.” Competition for international sales is intense, including from international manufacturers whose governments sometimes provide research and development assistance, marketing subsidies and other assistance for their products and services.
Substantial costs resulting from an accident; failure of or defect in our products or services; natural catastrophe or other incident; or liability arising from our products and services in excess of any legal protection, indemnity, and our insurance coverage (or for which indemnity or insurance is not available or not obtained) could adversely impact our financial condition, cash flows, and operating results.
Substantial costs resulting from an accident, failure of or defect in our products or services, natural catastrophe or other incident, or liability arising from our products and services in excess of any legal protection, indemnity, and our insurance coverage (or for which indemnity or insurance is not available or not obtained) could adversely impact our financial condition and operating results.
If a new health epidemic or outbreak were to occur, we could experience broad and varied impacts similar to the impact of COVID-19, including adverse impacts to our workforce and supply chain, inflationary pressures and increased costs, schedule or production delays, market volatility and other financial impacts.
If a new health epidemic or outbreak were to occur, we could experience broad and varied effects similar to the impact of COVID-19, including adverse impacts to our workforce and supply chain, inflationary pressures and increased costs, schedule or production delays, market volatility and other financial ramifications.
Competitors may be willing to accept more risk or lower profitability in competing for contracts than we are. The U.S. Government also may not award us large competitive contracts that we otherwise might have won in an effort to maintain a broad industrial base. U.S.
Competitors may be willing to accept more risk or lower profitability in competing for contracts than we are. The U.S. Government also may not award us large competitive contracts that we otherwise might have won in an effort to strengthen a broad industrial base. U.S.
The future occurrence of non-compliant components in our programs could cause suspensions in product deliveries, remediation work on installed components, contract price adjustments and alternate supply sourcing, all of which could adversely affect our results of operations, financial condition and cash flows.
The future occurrence of non-compliant components in our programs could cause suspensions in product deliveries, remediation work on installed components, contract price adjustments and alternate supply sourcing, all of which could adversely affect our financial condition and results of operations.
The technical complexity coupled with the fixed-price contract structure of certain of our ongoing development programs or new programs increases the risk that our costs will be greater than anticipated, resulting in reduced margins, operating profit, or reach-forward losses during the period of contract performance or upon contract award, all of which could be significant to our operating results, cash flows, or financial condition.
The technical complexity coupled with the fixed-price contract structure of certain of our ongoing development programs or new programs increases the risk that our costs will be greater than anticipated, resulting in reduced margins, operating profit, or reach-forward losses during the period of contract performance or upon contract award, all of which could be significant to our financial condition and operating results.
These laws, regulations or policies could take many forms, including carbon taxes, cap and trade regimes, increased efficiency standards, GHG reduction commitments, incentives or mandates for particular types of energy or changes in procurement laws.
These laws, regulations or policies could take many forms, including carbon taxes, cap and trade regimes, increased efficiency standards, GHG reduction commitments, incentives or mandates for particular types of energy, disclosure requirements or changes in procurement laws.
We also may incur unanticipated 18 Table of Contents costs or expenses, including post-closing asset impairment charges, expenses associated with eliminating duplicate facilities, employee retention, transaction-related or other litigation, and other liabilities. Any of the foregoing could adversely affect our business and results of operations. Joint ventures and other noncontrolling investments operate under shared control with other parties.
We also may incur unanticipated costs or expenses, including post-closing asset impairment charges, expenses associated with eliminating duplicate facilities, employee retention, transaction-related or other litigation, and other liabilities. Any of the foregoing could adversely affect our business and results of operations. Joint ventures and other noncontrolling investments operate under shared control with other parties.
Furthermore, some of our existing offset agreements are dependent upon the successful operation of joint ventures that we do not control and involve products and services that are outside of our core business, which may increase the risk of breaching our obligations, 16 Table of Contents exposing us to compliance risks of the joint venture, and impairing our ability to recover our investment.
Furthermore, some of our existing offset agreements are dependent upon the successful operation of joint ventures that we do not control and involve products and services that are outside of our core business, which may increase the risk of breaching our obligations, exposing us to compliance risks of the joint venture, and impairing our ability to recover our investment.
Changes in these factors, including actual returns on plan assets, may also affect our plan funding, cash flows and stockholders’ equity. 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.
Changes in these factors, including actual returns on plan assets, may also affect our plan funding, cash flows and stockholders’ equity. We could be required to make pension contributions earlier than and/or in excess of what was planned if our return on pension assets is less than our assumptions, which would reduce our free cash flow.
The F-35 program, which consists of multiple development, production and sustainment contracts, is our largest program and represented 26% of our total consolidated net sales in 2023. A decision by the U.S.
The F-35 program, which consists of multiple development, production and sustainment contracts, is our largest program and represented 26% of our total consolidated net sales in 2024. A decision by the U.S.
In addition, our ability to grow in key areas such as hypersonics programs, classified programs and next-generation franchise programs will be affected by the overall budget environment and whether development programs transition to production and the timing of such transition, all of which are dependent on U.S. Government authorization and funding.
In addition, our ability to grow in key areas such as hypersonics programs, classified programs and next-generation franchise programs will be affected by the 10 Table of Contents overall budget environment and whether development programs transition to production and the timing of such transition, all of which are dependent on U.S. Government authorization and funding.
If a contract is unilaterally imposed upon us, it may negatively affect our expected profit and cash flows on a program or impose burdensome terms. Bid Protests. U.S Government procurement laws permit legal challenges, referred to as bid protests, to the terms of a contract solicitation or the award of a contract.
If a contract is unilaterally imposed upon us, it may negatively affect our expected profit and cash flows on a program or impose burdensome terms. 11 Table of Contents Bid Protests. U.S Government procurement laws permit legal challenges, referred to as bid protests, to the terms of a contract solicitation or the award of a contract.
In addition, climate change-related litigation and investigations have increased in recent years and any claims or investigations against us could be costly to defend and our business could be adversely affected by the outcome. We are involved in several legal proceedings. We cannot predict the outcome of litigation and other contingencies with certainty.
In addition, climate change-related litigation and investigations have increased in recent years and any claims or investigations against us could be costly to defend and our business could be adversely affected by the outcome. We are involved in a number of legal proceedings. We cannot predict the outcome of litigation and other contingencies with certainty.
Our international business is conducted through foreign military sales (FMS) contracted through the U.S. Government and by direct commercial sales (DCS) to international customers. FMS contracts with the U.S. Government are subject to the FAR and the DFARS. Because the U.S.
Our international business is conducted through FMS contracted through the U.S. Government and by direct commercial sales (DCS) to international customers. FMS contracts with the U.S. Government are subject to the FAR and the DFARS. Because the U.S.
Because the identification and qualification of new or additional suppliers can take an extended period of time, issues with suppliers or trade actions that limit our ability to use certain suppliers, especially when single or sole sourced, can have an adverse impact on our business. Complying with U.S.
Because the identification and qualification of new or additional suppliers can take an extended period of time and can result in additional cost, issues with suppliers or trade actions that limit our ability to use certain suppliers, especially when single or sole sourced, can have an adverse impact on our business. Complying with U.S.
The sophistication of the threats continue to evolve and grow, including the risk associated with the use of emerging technologies, such as artificial intelligence and quantum computing, for nefarious purposes.
The sophistication of the threats continues to evolve and grow, including the risk associated with the use of emerging technologies, such as artificial intelligence and quantum computing, for nefarious purposes.
For example, we are limited in the amount of insurance we can obtain to cover unusually hazardous risks or certain natural hazards such as earthquakes, fires or extreme weather conditions, some of which may be exacerbated by climate change.
For example, we are limited in the amount of insurance we 20 Table of Contents can obtain to cover unusually hazardous risks or certain natural hazards such as earthquakes, fires or extreme weather conditions, some of which may be exacerbated by climate change.
Due to the fixed-price nature of the contracts, if our actual costs exceed our estimates, our margins and profits are reduced and we could incur a reach-forward loss. A reach-forward loss is when estimates of total costs to be incurred on a contract exceed total estimates of the transaction price.
Due to the fixed-price nature of the contracts, if our actual costs exceed our estimates, our margins and profits are reduced and we could incur a reach-forward loss. A reach-forward loss is when estimates of total costs to be incurred on a 12 Table of Contents contract exceed total estimates of the transaction price.
Existing coverage is renewed annually and may be canceled pursuant to the terms of the policies while we remain 20 Table of Contents exposed to the risk and it is not possible to obtain insurance to protect against all operational risks, natural hazards and liabilities.
Existing coverage is renewed annually and may be canceled pursuant to the terms of the policies while we remain exposed to the risk and it is not possible to obtain insurance to protect against all operational risks, natural hazards and liabilities.
These commercial entities may not be accustomed to government contracting and may be unwilling to agree to the government’s customary terms, including with respect to intellectual property, liability and indemnification term, which may prevent or lessen the benefit of collaboration.
These commercial entities may not be accustomed to government contracting and may be unwilling to agree to the government’s customary terms, including with respect to intellectual property, liability and indemnification term, which may 14 Table of Contents prevent or lessen the benefit of collaboration.
A joint venture partner may have economic or other business interests that are inconsistent with ours and we may be unable to prevent strategic decisions that may adversely affect our business, financial condition and results of operations.
A joint venture partner may have economic or other business interests that are inconsistent with ours and we may be unable to prevent strategic decisions that may adversely affect our business, financial condition and results of 18 Table of Contents operations.
If we are unable to protect sensitive information, including complying with evolving information security, data protection and privacy regulations, our customers or governmental authorities could investigate the adequacy of our threat mitigation and detection processes and procedures; and could bring actions against us for noncompliance with applicable laws and regulations.
If we are unable to protect sensitive information, including by complying with evolving information security, data protection and privacy regulations and related disclosure requirements, our customers or governmental authorities could investigate the adequacy of our threat mitigation and detection processes and procedures; and could bring actions against us for noncompliance with applicable laws and regulations.
To the extent we incur costs in excess of funds obligated on a contract or in advance of a contract 10 Table of Contents award or contract definitization, we are at risk of not being reimbursed for those costs unless and until additional funds are obligated under the contract or the contract is successfully awarded, definitized and funded, which could adversely affect our results of operations, financial condition and cash flows.
To the extent we incur costs in excess of funds obligated on a contract or in advance of a contract award or contract definitization, we are at risk of not being reimbursed for those costs unless and until additional funds are obligated under the contract or the contract is successfully awarded, definitized and funded, which could adversely affect our financial condition and results of operations.
Artificial intelligence technologies have rapidly developed and our business may be 14 Table of Contents adversely affected if we cannot successfully integrate the technology into our internal business processes and product and service offerings in a timely, cost-effective, compliant and responsible manner.
Artificial intelligence technologies have rapidly developed and our business may be adversely affected if we cannot successfully integrate the technology into our internal business processes and product and service offerings in a timely, cost-effective, compliant and responsible manner.
If any of these were to occur, our future results and performance could be adversely impacted. International sales may pose different economic, regulatory, competition and other risks. International sales present risks that are different and potentially greater than those encountered in our U.S. business. In 2023, 26% of our total net sales were from international customers.
If any of these were to occur, our future results and performance could be adversely impacted. International sales may pose different economic, regulatory, competition and other risks. International sales present risks that are different and potentially greater than those encountered in our U.S. business. In 2024, 26% of our total net sales were associated with international customers.
In addition, the U.S. Government could terminate a prime contract under which we are a subcontractor, notwithstanding the fact that our performance and the quality of the products or services we delivered were consistent with our contractual obligations as a subcontractor. Undefinitized Contract Action (UCA).
Government could terminate a prime contract under which we are a subcontractor, notwithstanding the fact that our performance and the quality of the products or services we delivered were consistent with our contractual obligations as a subcontractor. Undefinitized Contract Action (UCA).
Challenges and risks associated with this program include supplier performance, software development, definitizing and receiving funding for contracts on a timely basis, execution of future flight tests and findings resulting from testing and operating the aircraft, the level of cost associated with life cycle operations, sustainment and potential contractual obligations, inflation-related cost pressures and the ability to improve affordability.
Challenges and risks associated with this program include supplier performance, software development, definitizing and receiving funding for contracts on a timely basis, execution of future flight tests and findings resulting from testing and operating the aircraft, the level of cost associated with life cycle operations, sustainment and potential contractual obligations, inflation-related cost pressures, the ability to improve affordability, and potential competition from next-generation or other platforms.
Government may assert that it is not required to appropriate additional funding. If a contract is terminated for default, the U.S. Government could make claims to reduce our recovery or recoup its procurement costs and could assess other special penalties, exposing us to liability and adversely affecting our ability to compete for future 11 Table of Contents contracts and orders.
Government may assert that it is not required to appropriate additional funding. If a contract is terminated for default, the U.S. Government could make claims to reduce our recovery or recoup its procurement costs and could assess other special penalties, exposing us to liability and adversely affecting our ability to compete for future contracts and orders. In addition, the U.S.
We derived 73% of our total consolidated net sales from the U.S. Government in 2023, including 64% from the Department of Defense (DoD). We expect to continue to derive most of our sales from work performed under U.S. Government contracts.
We derived 73% of our total consolidated net sales from the U.S. Government in 2024, including 65% from the Department of Defense (DoD). We expect to continue to derive most of our sales from work performed under U.S. Government contracts.
Failure to perform to customer expectations and contract requirements may result in reduced fees or losses and may adversely affect our financial performance. 12 Table of Contents Contract types primarily include fixed-price and cost-reimbursable contracts.
Failure to perform to customer expectations and contract requirements may result in reduced fees or losses and may adversely affect our financial performance. Contract types primarily include fixed-price and cost-reimbursable contracts.
Our business is highly sensitive to geopolitical and security issues, including foreign policy actions taken by governments such, as tariffs, sanctions, embargoes, export and import controls and other trade restrictions, which can affect the demand for our products and services, the ability to sell our products and services, and disrupt our supply chain, all of which could adversely affect our business.
Our business is highly sensitive to geopolitical and security issues, including foreign policy actions taken by governments such as tariffs, sanctions, embargoes, export and import controls, and other trade restrictions, which can affect the demand for, and our ability to sell, our products and services, cause disruptions to our supply chain, and, ultimately, could adversely affect our business.
We seek to obtain insurance coverage from established and reputable insurance carriers to the extent available in order to cover these risks and liabilities. However, the amount of insurance coverage that we maintain or that is available to purchase in the market may not be adequate to cover all claims or liabilities.
We seek to obtain insurance coverage from established and reputable insurance carriers to the extent available in order to cover these risks and liabilities. However, the amount of insurance coverage that we maintain or that is available to purchase in the market may not be adequate to cover all claims or liabilities and we may self-insure certain types of risk.
For example, higher interest rates generally reduce the measure of our gross pension obligations while lower interest rates increase it. Public health. We face a wide variety of risks related to public health crises, epidemics, pandemics or similar events, including COVID-19.
Interest rates also impact our pension. For example, higher interest rates generally reduce the measure of our gross pension obligations while lower interest rates increase it. Public health. We face a wide variety of risks related to public health crises, epidemics, pandemics or similar events.
It is also critical that we develop and train employees, hire new qualified personnel, and successfully manage the short and long-term transfer of critical knowledge and skills, including leadership development and succession planning throughout our business.
In conjunction with this, it is critical that we develop and train employees, hire new qualified personnel, and successfully manage the short and long-term transfer of critical knowledge and skills, including leadership development and succession planning throughout our business.
Heightened levels of inflation and the potential worsening of macro-economic conditions, including slower growth or recession, changes to fiscal and monetary policy, tighter credit, higher interest rates and currency fluctuations, present a risk for us, our suppliers and the stability of the broader defense industrial base.
Heightened levels of inflation and the potential worsening of macroeconomic conditions, including slower growth or recession, changes to fiscal and monetary policy, tighter credit, higher interest rates and currency fluctuations, present risks for us, our suppliers and the stability of the broader defense industrial base.
U.S. regulators have increased their scrutiny of mergers and acquisitions in recent years, which could continue to limit our ability to execute certain transactions that we might otherwise pursue. Acquisition, divestiture, joint venture and investment transactions often require substantial management resources and have the potential to divert our attention from our existing business.
U.S. regulators have increased their scrutiny of mergers and acquisitions in recent years, which could continue to limit our ability to execute certain transactions that we might otherwise pursue. Acquisitions, divestitures, joint ventures and investments often require substantial management resources and have the potential to divert our attention from our existing business.
We have $10.8 billion of goodwill assets recorded on our consolidated balance sheet as of December 31, 2023 from previous acquisitions, which represents approximately 21% of our total assets. These goodwill assets are subject to annual impairment testing and more frequent testing upon the occurrence of certain events or significant changes in circumstances that indicate goodwill may be impaired.
We have $11.1 billion of goodwill assets recorded on our consolidated balance sheet as of December 31, 2024 from previous acquisitions, which represents approximately 20% of our total assets. These goodwill assets are subject to annual impairment testing and more frequent testing upon the occurrence of certain events or significant changes in circumstances that indicate goodwill may be impaired.
See “Note 1 – Organization and Significant Accounting Policies” included in our Notes to Consolidated Financial Statements for more information on TUHP. Our inability to perform under contracts with international customers as a result of actions taken by the U.S.
See “Note 1 – Organization and Significant Accounting Policies” included in our Notes to Consolidated Financial Statements for more information on TUHP. Our inability to perform under, or compete for, contracts with international customers because of actions taken by the U.S.
Any delays or work stoppages could adversely affect our ability to perform under our contracts, which could negatively impact our results of operations, cash flows, and financial condition. 17 Table of Contents Cyber-attacks and other security threats and disruptions could have a material adverse affect on our business.
Any delays or work stoppages could adversely affect our ability to perform under our contracts, which could negatively impact our financial condition and results of operations. Cyber-attacks and other security threats and disruptions could have a material adverse effect on our business.
Government functions as an intermediary in FMS sales, we are reliant on the capacity and speed of the DoD’s administration of requests from non-U.S. countries to convert requests to sales.
Government functions as an intermediary in FMS sales, we are reliant on, and could be adversely impacted by, the capacity and speed of the DoD’s administration of requests from non-U.S. countries to convert requests to sales.
Although we believe defense spending is more resilient to adverse macro-economic conditions than many other industrial sectors, our suppliers and other partners, many of which are more exposed to commercial markets or have fewer resources, may be adversely impacted to a more significant degree than we are by an economic downturn, which could affect their performance and adversely impact our operations.
Although we believe defense spending is more resilient to adverse macroeconomic conditions than many other industrial sectors, our suppliers and other partners, many of which are more exposed to commercial markets or have fewer resources, may be adversely impacted to a more significant degree than we are by an economic downturn.
Government has resulted and may in the future result in our inability to recover our costs and reach forward losses, claims and contract terminations by these customers and suppliers, which could have an adverse effect on our operating results. Macroeconomic.
Government has resulted and may in the future result in our inability to recover our costs, incurrence of reach-forward losses, claims and contract terminations by these customers and suppliers, and limitations on our ability to pursue new business, which could have an adverse effect on our operating results. Macroeconomic.
The DoD is also implementing an overarching intellectual property acquisition policy that will require a greater focus and planning as to intellectual property rights for its programs, and we have no assurance as to the potential impacts of this policy or any associated regulatory changes on future acquisitions.
The DoD is also implementing an overarching intellectual property acquisition policy that will require a greater focus and planning as to intellectual property rights for its programs, with the potential impacts of this policy or any associated regulatory changes on future acquisitions yet to be determined.
If we are unable to successfully 15 Table of Contents mitigate the impact of inflation, our profits, margins and cash flows, particularly for existing fixed-price contracts, may be adversely affected.
If we are unable to successfully mitigate the impact, our future profits, margins and cash flows, particularly for existing fixed-price contracts, may be adversely affected.
In addition, macroeconomic conditions could cause budgetary pressures for our government customers resulting in reductions or delays in spending, which could adversely impact our business. Higher interest rates increase the borrowing costs on new debt and could affect the fair value of our investments. Interest rates also impact our pension.
Such an impact could affect their performance and adversely impact our operations. In addition, macroeconomic conditions could cause budgetary 15 Table of Contents pressures for our government customers resulting in reductions or delays in spending, which could adversely impact our business. Higher interest rates increase the borrowing costs on new debt and could affect the fair value of our investments.
Government obtains certain rights in intellectual property, including patents, developed by us and our subcontractors and suppliers in performance of government contracts or with government funding. The U.S. Government may use or authorize others, including competitors, to use such intellectual property.
We also license intellectual property to and from third parties. The FAR and DFARS provide that the U.S. Government obtains certain rights in intellectual property, including patents, developed by us and our subcontractors and suppliers in performance of government contracts or with government funding. The U.S. Government may use, or may authorize others including competitors to use, such intellectual property.
For example, accounting for sales using the percentage-of-completion cost-to-cost method requires that we assess risks and make assumptions regarding future schedule, cost, technical and performance issues for thousands of contracts, many of which are long-term in nature.
The accounting for some of our most significant activities is based on judgments and estimates, which are complex and subject to many variables. For example, accounting for sales using the percentage-of-completion cost-to-cost method requires that we assess risks and make assumptions regarding future schedule, cost, technical and performance issues for thousands of contracts, many of which are long-term in nature.
In addition to owning a large portfolio of patents and trademarks, we develop and own other intellectual property, including copyrights, trade secrets and research, development and engineering know-how, which contribute significantly to our business. We also license intellectual property to and from third parties. The FAR and DFARS provide that the U.S.
We own a substantial number of U.S. and foreign patents and trademarks related to the products and services we provide. In addition to owning a large portfolio of patents and trademarks, we develop and own other intellectual property, including copyrights, trade secrets and research, development and engineering know-how, which contribute significantly to our business.
Breaches in our multi-tiered supply chain, which is comprised of thousands of direct and indirect suppliers, has and could in the future compromise our data and adversely affect customer deliverables.
Adversaries actively seek to exploit security and cybersecurity weaknesses in our supply chain. Breaches in our multi-tiered supply chain, which is comprised of thousands of direct and indirect suppliers, have and could in the future compromise our data and adversely affect customer deliverables.
If appropriations are delayed or a government shutdown were to occur and continue for an extended period of time, we could be at risk of reduced orders, program cancellations and other disruptions and nonpayment. When the U.S.
If appropriations are delayed or a government shutdown were to occur and continue for an extended period, we could be at risk of reduced orders, program cancellations and other disruptions and nonpayment. When the U.S. Government operates under a continuing resolution, new contract and program starts are restricted and funding for our programs may be unavailable, reduced or delayed.
Other Risks Related to our Operations We are heavily dependent on suppliers and if our subcontractors or other suppliers or teaming agreement or joint venture partners fail to perform their obligations, our performance and ability to win future business could be adversely affected.
Similar government oversight and risks to our business and reputation exist in most other countries where we conduct business. 13 Table of Contents Other Risks Related to our Operations We are heavily dependent on suppliers and if our subcontractors or other suppliers or teaming agreement or joint venture partners fail to perform their obligations, our performance and ability to win future business could be adversely affected.
The conflict has resulted in increased demand for some of our products and services; however, if we are unable to increase production to meet demand on the timeframe expected by potential customers, whether it be from supply constraints, government funding or otherwise, then we may lose sales opportunities as they seek alternatives, even less capable ones, that may be able to be delivered more quickly.
However, if we are unable to increase production to meet demand in the timeframe expected by potential customers, whether due to supply constraints, government funding, or otherwise, then we may lose sales opportunities as those possible customers seek alternatives, even less capable ones, that may be delivered more quickly.
Government contracts, including FMS. However, there is a lag between the time when we contribute cash to our plans under pension funding rules and when we recover pension costs under U.S. Government Cost Accounting Standards (CAS), which can affect the timing of our cash flows.
We generally can recover a significant portion of these contributions related to our plans as allowable costs on our U.S. Government contracts, including FMS. However, there can be differences between the time when we contribute cash to our plans under pension funding rules and when we recover pension costs under CAS, which can affect the timing of our cash flows.
See also the “Status of the F-35 Program” in Management Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the current program status and specific challenges and risks, including with respect to Technology Refresh 3 (TR-3) configuration development and deliveries.
See also “Status of the F-35 Program” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the current program status and specific challenges and risks.
With regard to cash flow, we have made substantial cash contributions to our plans as required by the Employee Retirement Income Security Act of 1974 (ERISA), as amended, and expect to make future contributions as required or when deemed prudent. We generally can recover a significant portion of these contributions related to our plans as allowable costs on our U.S.
We have made substantial cash contributions to our plans as required by the Employee Retirement Income Security Act of 1974 (ERISA), as amended, and in accordance with U.S. Government Cost Accounting Standards (CAS), and expect to make future contributions as required or when deemed prudent.
If we cannot adequately attract and retain personnel with the requisite skills or clearances in this competitive market, our performance and future prospects may be adversely affected. Workforce dynamics are constantly evolving. If we do not manage changing workforce dynamics effectively, it could adversely affect our culture, reputation and operational flexibility.
If we cannot adequately attract and retain personnel with the requisite skills or clearances in this competitive market, our performance and future prospects may be adversely affected.
Non-U.S. governments also may have certain rights in patents and other intellectual property developed in performance of our contracts with these entities. The U.S. Government is pursuing aggressive positions regarding the types of intellectual property to which government use rights apply and when it is appropriate for the government to insist on broad use rights.
Non-U.S. governments also may have certain rights in patents and other intellectual property developed in performance of our contracts with these entities. The U.S. Government is pursuing aggressive positions on the acquisition of broad data and software packages as well as the scope and applicability of these rights once acquired.
Government in the exercise of foreign policy, Congressional oversight or the financing of particular programs, including the prevention or imposition of conditions upon the sale and delivery of our products or the transfer of sensitive technology, the imposition of sanctions, or Congressional action to restrict sales of our products. For example, the U.S.
Our international sales also could be adversely affected by actions taken by the U.S. Government, including the exercise of foreign policy, Congressional oversight or the financing of particular programs, that may prevent, restrict or otherwise impose conditions upon the sale and delivery of our products or the transfer of sensitive technology. For example, the U.S.
Their relationships with government contractors, including us, may increase the risk that they are targeted by the same threats we face, however, they may not be as prepared for such threats. Adversaries actively seek to exploit security and cybersecurity weaknesses in our supply chain.
These entities are typically outside our control and may have access to our information with varying levels of security and cybersecurity resources, expertise, safeguards and capabilities. Their relationships with government contractors, including us, may increase the risk that they are targeted by the same threats we face, however, they may not be as prepared for such threats.
We are routinely subject to audit by our customers on government contracts and the results of those audits could have an adverse effect on our business, reputation and results of operations. U.S. Government agencies, including the Defense Contract Audit Agency, the Defense Contract Management Agency and various agency Inspectors General, routinely audit and investigate government contractors.
We are routinely subject to audit by our customers on government contracts, including audits relating to our disclosed Cost Accounting Standards (CAS) rate structure or any changes to our CAS rate structure and the results of those audits could have an adverse effect on our business, reputation and results of operations U.S.
The improper conduct of our employees or others working on behalf of us who have access to export controlled, classified or other sensitive information could also adversely affect our business and reputation. Our customers (including sites that we operate and manage for our customers), suppliers, subcontractors and joint venture partners, experience similar security threats.
The improper conduct of our employees or others working on our 17 Table of Contents behalf who have access to export controlled, classified or other sensitive information could also adversely affect our business and reputation.
Government operates under a continuing resolution, new contract and program starts are restricted and funding for our programs may be unavailable, reduced or delayed. Our contracts with the U.S. Government are conditioned upon the continuing availability of Congressional appropriations. Congress usually appropriates funds on a fiscal year (FY) basis even though contract performance may extend over many years.
Our contracts with the U.S. Government are conditioned upon the continuing availability of Congressional appropriations. Congress usually appropriates funds on a fiscal year (FY) basis even though contract performance may extend over many years. Consequently, contracts are often partially funded initially, and additional funds are committed only as Congress makes further appropriations over time.
Government contractors, we have received audit and investigative reports recommending the reduction of certain contract prices or that certain payments be repaid, delayed, or withheld, and may involve substantial amounts. Similarly, like other U.S. Government contractors, audits and investigations also occur related to cost reimbursements that are based upon our final allowable incurred costs for each year.
Government audits and investigations often take years to complete, and many result in no adverse action against us. Like many U.S. Government contractors, we have received audit and investigative reports recommending the reduction of certain contract prices or that certain payments be repaid, delayed, or withheld, and may involve substantial amounts. Similarly, like other U.S.
We have unaudited or unsettled incurred cost claims related to past years, which limits our ability to issue final billings on contracts for which authorized and appropriated funds may be expiring or can result in delays in final billings and our ability to close out a contract. 13 Table of Contents If an audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including reductions of the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, penalties, fines or suspension or debarment from doing business with the U.S.
If an audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including reductions of the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, repayments, penalties, fines or suspension or debarment from doing business with the U.S. Government.
For more information on our industrial development obligations, including the notional value of our remaining industrial development obligations and potential penalties for non-compliance, see “Contractual Commitments” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
For more information on our industrial development obligations, including the notional value of our remaining industrial development obligations and potential penalties for non-compliance, see “Contractual Commitments” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. 16 Table of Contents We may be unable to benefit fully from or adequately protect our intellectual property rights or use third-party intellectual property, which could negatively affect our business.
In addition, we are regularly under audit or examination by tax authorities, including foreign tax authorities. 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. Our business involves significant risks and uncertainties that may not be covered by indemnity or insurance.
In addition, we are regularly under audit or examination by tax authorities, including foreign tax authorities. The final resolution of tax audits and any related administrative reviews or litigation could result in unanticipated increases in our tax expense and changes to the timing of required tax payments, which could affect profitability and cash flows for any particular reporting period.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe ERM process’s annual risk assessment is presented to the Board of Directors. We rely heavily on our supply chain to deliver our products and services to our customers, and a cybersecurity incident at a supplier, subcontractor or joint venture partner could materially adversely impact us.
Biggest changeWe also share and receive threat intelligence with our defense industrial base peers, government agencies, information sharing and analysis centers and cybersecurity associations. We rely heavily on our supply chain to deliver our products and services to our customers, and a cybersecurity incident at a supplier, subcontractor, joint venture partner, or service provider could materially adversely impact us.
In the event of an incident, we intend to follow our detailed incident response playbook, which outlines the steps to be followed from incident detection to mitigation, recovery and notification, including notifying functional areas (e.g. legal), as well as senior leadership and the Board, as appropriate.
In the event of an incident, we intend to follow our detailed incident response playbook, which outlines the steps to be followed from incident detection to mitigation, recovery and notification, including notifying functional areas (e.g., legal), as well as senior leadership, the Board, and regulators, as appropriate.
As an aerospace and defense company, we face a multitude of cybersecurity threats that range from attacks common to most industries, such as ransomware and denial-of-service, to attacks from more advanced and persistent, highly organized adversaries, including nation state actors, that target the defense industrial base and other critical infrastructure sectors.
As an aerospace and defense company, we face a multitude of cybersecurity threats that range from attacks common to most industries, such as ransomware and denial-of-service, to attacks from more advanced and persistent, highly organized adversaries, including nation state actors, some of which target the defense industrial base and other critical infrastructure sectors.
We believe we are well positioned to meet the requirements of the CMMC and are preparing for certification once the requirements are effective. In addition to following DoD guidance and implementing pre-existing third party frameworks, we have developed our own practices and frameworks, which we believe enhance our ability to identify and manage cybersecurity risks.
We believe we are well positioned to meet the requirements of the CMMC and are preparing for certification. In addition to following DoD guidance and implementing pre-existing third party frameworks, we have developed our own practices and frameworks, which we believe enhance our ability to identify and manage cybersecurity risks.
While Lockheed Martin maintains cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. See Item 1A. “Risk Factors” for a discussion of cybersecurity risks.
While Lockheed Martin maintains cybersecurity 23 Table of Contents insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. See Item 1A. “Risk Factors” for a discussion of cybersecurity risks.
The Classified Business and Security Committee of the Board of Directors is briefed by senior leadership, as appropriate, on the 22 Table of Contents cybersecurity of classified programs and the security of our classified business supply chain.
The Classified Business and Security Committee of the Board of Directors is briefed by senior leadership, as appropriate, on the cybersecurity of classified programs and the security of our classified business supply chain.
ITEM 1C. Cybersecurity We believe cybersecurity is critical to advancing our 21st Century Security vision and enabling our digital transformation efforts.
ITEM 1C. Cybersecurity Risk Management and Strategy We believe cybersecurity is critical to advancing our 21st Century Security vision and enabling our digital transformation efforts.
As a defense contractor, we must comply with extensive regulations, including requirements imposed by the Defense Federal Acquisition Regulation Supplement (DFARS) related to adequately safeguarding controlled unclassified information (CUI) and reporting cybersecurity incidents to the DoD. We have implemented cybersecurity policies and frameworks based on industry and governmental standards to align closely with DoD requirements, instructions and guidance.
As a defense contractor, we must comply with extensive regulations, including requirements imposed by the Defense Federal Acquisition Regulation Supplement (DFARS) related to adequately safeguarding controlled unclassified information (CUI) and reporting cybersecurity incidents to the DoD.
The Board of Directors oversees management’s processes for identifying and mitigating risks, including cybersecurity risks, to help align our risk exposure with our strategic objectives.
We also make available cybersecurity education and awareness materials and briefings to our suppliers. Governance The Board of Directors oversees management’s processes for identifying and mitigating risks, including cybersecurity risks, to help align our risk exposure with our strategic objectives.
Our customers, suppliers, subcontractors and joint venture partners face similar cybersecurity threats, and a cybersecurity incident impacting us or any of these entities could materially adversely affect our operations, performance and results of operations. These cybersecurity threats and related risks make it imperative that we are a leader in the information security field, and we expend considerable resources on cybersecurity.
Our customers, suppliers, subcontractors and joint venture partners face similar cybersecurity threats, and a cybersecurity incident impacting us or any of these entities could materially adversely affect our operations, performance and results of operations.
Moreover, we continue to work with the DoD on assessing cybersecurity risk and on policies and practices aimed at mitigating these risks.
We have implemented cybersecurity policies and frameworks based on industry and governmental 22 Table of Contents standards to align closely with DoD requirements, instructions and guidance. Moreover, we continue to work with the DoD on assessing cybersecurity risk and on policies and practices aimed at mitigating these risks.
We also make available cybersecurity education and awareness materials and briefings to our suppliers. 23 Table of Contents Notwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us.
The ERM process’s annual risk assessment and relevant mitigations are presented to the Board of Directors. Notwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us.
Employees outside of our corporate information security organization also have a role in our cybersecurity defenses and they are immersed in a corporate culture supportive of security, which we believe improves our cybersecurity. The corporate information security organization has implemented a governance structure and processes to assess, identify, manage and report cybersecurity risks.
Employees outside of our corporate information security organization also have a role in our cybersecurity defenses and they are immersed in a corporate culture supportive of security, which we believe improves our cybersecurity. Assessing, identifying and managing cybersecurity related risks are integrated into our overall enterprise risk management (ERM) process.
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We also share and receive threat intelligence with our defense industrial base peers, government agencies, information sharing and analysis centers and cybersecurity associations. Assessing, identifying and managing cybersecurity related risks are integrated into our overall enterprise risk management (ERM) process.
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These cybersecurity threats and related risks make it imperative that we strive to be a leader in the information security field, and we expend considerable resources on cybersecurity. Our corporate information security organization has implemented a governance structure and processes to assess, identify, manage and report cybersecurity risks.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following is a summary of our square feet of floor space owned, leased, or utilized by business segment at December 31, 2023 (in millions): Owned Leased Government- Owned Total Aeronautics 5.5 3.0 14.8 23.3 Missiles and Fire Control 7.8 2.6 2.0 12.4 Rotary and Mission Systems 10.8 4.7 0.2 15.7 Space 9.3 3.0 0.1 12.4 Corporate activities 2.4 0.9 — 3.3 Total 35.8 14.2 17.1 67.1 We believe our facilities are in good condition and adequate for their current use.
Biggest changeThe following is a summary of our square feet of floor space owned, leased, or utilized by business segment at December 31, 2024 (in millions): Owned Leased Government- Owned Total Aeronautics 5.1 3.2 14.7 23.0 Missiles and Fire Control 7.8 2.5 2.0 12.3 Rotary and Mission Systems 10.7 4.9 0.2 15.8 Space 9.5 3.2 0.1 12.8 Corporate activities 2.5 0.9 — 3.4 Total 35.6 14.7 17.0 67.3 We believe our facilities are in good condition and adequate for their current use.
At December 31, 2023, we had significant operations in the following locations: • Aeronautics - Palmdale, California; Marietta, Georgia; Greenville, South Carolina; and Fort Worth, Texas. • Missiles and Fire Control - Camden, Arkansas; Ocala and Orlando, Florida; Lexington, Kentucky; and Grand Prairie, Texas. • Rotary and Mission Systems - Stratford, Connecticut; Orlando, Florida; Moorestown/Mt.
At December 31, 2024, we had significant operations in the following locations: • Aeronautics - Palmdale, California; Marietta, Georgia; Greenville, South Carolina; and Fort Worth, Texas. • Missiles and Fire Control - Camden, Arkansas; Ocala and Orlando, Florida; Lexington, Kentucky; and Grand Prairie, Texas • Rotary and Mission Systems - Stratford, Connecticut; Orlando, Florida; Moorestown/Mt.
ITEM 2. Properties At December 31, 2023, we owned or leased building space (including offices, manufacturing plants, warehouses, service centers, laboratories and other facilities) at 335 locations primarily in the U.S. Additionally, we manage or occupy 9 government-owned facilities under lease and other arrangements.
ITEM 2. Properties At December 31, 2024, we owned or leased building space (including offices, manufacturing plants, warehouses, service centers, laboratories and other facilities) at 356 locations primarily in the U.S. Additionally, we manage or occupy 9 government-owned facilities under lease and other arrangements.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor 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 “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” included in our Notes to Consolidated Financial Statements.
Biggest changeFor 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 “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” included in our Notes to Consolidated Financial Statements, which are incorporated herein by reference.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeCahill previously served as Senior Vice President of Global Business Development & Strategy (GBD&S) from March 2021 to October 2022. Prior to that, Mr. Cahill served as Senior Vice President Lockheed Martin International from October 2019 to March 2021; and as Vice President, Integrated Air and Missile Defense (IAMD) Systems for MFC from January 2016 to October 2019. Stephanie C.
Biggest changeCahill (age 59), President – Missiles and Fire Control Mr. Cahill has served as President for the Missiles and Fire Control (MFC) business segment since November 2022. Mr. Cahill previously served as Senior Vice President Global Business Development & Strategy (GBD&S) from March 2021 to October 2022. Prior to that, Mr.
She previously served as Vice President, Investor Relations from October 2022 to December 2023. Prior to joining Lockheed Martin in October 2022, she served as Vice President, Finance – FP&A and Global Components for Arrow Electronics from June 2019 to October 2022.
She previously served as Vice President, Investor Relations from October 2022 to December 2023. Prior to joining Lockheed Martin Corporation in October 2022, she served as Vice President, Finance – FP&A and Global Components of Arrow Electronics from June 2019 to October 2022.
ITEM 4. Mine Safety Disclosures Not applicable. 24 Table of Contents ITEM 4(a). Information about our Executive Officers Our executive officers as of January 23, 2024 are listed below, with their ages on that date, positions and offices currently held, and principal occupation and business experience during at least the last five years.
ITEM 4. Mine Safety Disclosures Not applicable. 24 Table of Contents Information about our Executive Officers Our executive officers as of January 28, 2025 are listed below, with their ages on that date, positions and offices currently held, and principal occupation and business experience during at least the last five years.
Paul has served as Vice President and Controller since June 2022. Previously, he served as Vice President, Accounting from March 2015 to July 2023. Maria A. Ricciardone (age 48), Vice President, Treasurer and Investor Relations Ms. Ricciardone has served as Vice President, Treasurer and Investor Relations since January 1, 2024.
Paul has served as Vice President and Controller since June 2022. Previously, he served as Vice President, Accounting from March 2015 to June 2022. Maria A. Ricciardone (age 49), Vice President, Treasurer and Investor Relations Ms. Ricciardone has served as Vice President, Treasurer and Investor Relations since January 2024.
Prior to that, she served as Vice President, Strategy and Investor Relations at Hubbell Incorporated from March 2015 to June 2019. 25 Table of Contents Frank A. St. John (age 57), Chief Operating Officer Mr. St. John has served as Chief Operating Officer since June 2020.
Prior to that, she served as Treasurer and Vice President, Strategy and Investor Relations for Hubbell Incorporated from January 2016 to June 2019. 25 Table of Contents Frank A. St. John (age 58), Chief Operating Officer Mr. St. John has served as Chief Operating Officer since June 2020.
Lavan has served as Senior Vice President, General Counsel and Corporate Secretary since September 2010. Robert M. Lightfoot, Jr. (age 60), Executive Vice President – Space Mr. Lightfoot has served as Executive Vice President of the Space business segment since January 2022. He previously served as Vice President, Operations for the Space business segment from June 2021 to December 2021.
Robert M. Lightfoot, Jr. (age 61), President – Space Mr. Lightfoot has served as President for the Space business segment since January 2022. He previously served as Vice President, Operations for the Space business segment from June 2021 to December 2021.
Previously, he was Chairman, President and CEO of American Tower Corporation from February 2004 to March 2020; and Executive Chairman from March 2020 to May 2020. Gregory M. Ulmer (age 59), Executive Vice President – Aeronautics Mr. Ulmer has served as Executive Vice President for the Aeronautics business segment since February 2021.
He has served on the Lockheed Martin Corporation Board of Directors since January 2018. Previously, he was Chairman, President and CEO of American Tower Corporation from February 2004 to March 2020; and Executive Chairman from March 2020 to May 2020. Gregory M. Ulmer (age 60), President – Aeronautics Mr.
Hill (age 58), Executive Vice President – Rotary and Mission Systems Ms. Hill has served as Executive Vice President of the Rotary and Mission Systems (RMS) business segment since June 2020. She previously served as Senior Vice President, Enterprise Business Transformation from June 2019 to June 2020.
Cahill served as Senior Vice President Lockheed Martin International from October 2019 to March 2021. Stephanie C. Hill (age 60), President – Rotary and Mission Systems Ms. Hill has served as President for the Rotary and Mission Systems (RMS) business segment since June 2020. She previously served as Senior Vice President, Enterprise Business Transformation from June 2019 to June 2020.
He served as Vice President and General Manager, F-35 Lightning II Program from March 2018 to January 2021. Prior to that, he served as Vice President, F-35 Aircraft Production business unit from March 2016 to March 2018. 26 Table of Contents PART II
Ulmer has served as President for the Aeronautics business segment since February 2021. He previously served as Vice President and General Manager, F-35 Lightning II Program from March 2018 to January 2021. 26 Table of Contents PART II
Malave served as Senior Vice President and Chief Financial Officer of L3Harris Technologies, Inc. (L3Harris) from June 2019 to January 2022. Before joining L3Harris, Mr.
Malave served as Senior Vice President and Chief Financial Officer of L3Harris Technologies, Inc. (L3Harris) from June 2019 to January 2022. Kevin J. O’Connor (age 57), Senior Vice President, General Counsel and Corporate Secretary Mr. O’Connor has served as Senior Vice President, General Counsel and Corporate Secretary since January 2025.
He previously served as Executive Vice President of RMS from August 2019 to June 2020. Prior to that, he served as Executive Vice President of MFC from January 2018 to August 2019; and as Executive Vice President and Deputy Programs for MFC from June 2017 to January 2018. James D. Taiclet (age 63), Chairman, President and Chief Executive Officer Mr.
He previously served as Executive Vice President for RMS from August 2019 to June 2020. James D. Taiclet (age 64), Chairman, President and Chief Executive Officer Mr. Taiclet has served as Chairman since March 2021 and as President and Chief Executive Officer (CEO) of Lockheed Martin Corporation since June 2020.
Prior to that, he served as Vice President, Strategy and Business Development of Space from May 2019 to June 2021. Prior to joining Lockheed Martin in 2019, Mr. Lightfoot served as President, LSINC Corporation, a provider of product development and engineering services, from May 2018 to May 2019.
Prior to that, he served as Vice President, Strategy and Business Development for Space from May 2019 to June 2021. Jesus Malave (age 56), Chief Financial Officer Mr. Malave has served as Chief Financial Officer since January 2022. Prior to joining Lockheed Martin Corporation in 2022, Mr.
There are no family relationships among any of our executive officers and directors. All executive officers serve at the discretion of the Board of Directors. Timothy S. Cahill (age 58), Executive Vice President – Missiles and Fire Control Mr. Cahill has served as Executive Vice President for the Missiles and Fire Control (MFC) business segment, since November 2022. Mr.
Effective February 21, 2024, the titles of our business segment executive officers were changed from Executive Vice President to President, with no changes to their duties or responsibilities. There are no family relationships among any of our executive officers and directors. All executive officers serve at the discretion of the Board of Directors. Timothy S.
Malave worked at United Technologies Corporation (UTC) as Vice President and Chief Financial Officer of UTC’s Carrier Corporation from April 2018 to June 2019; and as Chief Financial Officer of UTC’s Aerospace Systems from January 2015 to April 2018. H. Edward Paul, III (age 48), Vice President and Controller Mr.
Prior to joining Lockheed Martin Corporation he served as the Senior Vice President and Chief Legal Officer of Carrier Corporation from January 2020 until January 2025, prior to which he served as Chief Legal Officer of Point72 Asset Management from June 2015 until January 2020. H. Edward Paul, III (age 49), Vice President and Controller Mr.
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Prior to that, she was Deputy Executive Vice President of RMS from October 2018 to June 2019; and Senior Vice President for Corporate Strategy and Business Development from September 2017 to October 2018. Maryanne R. Lavan (age 64), Senior Vice President, General Counsel and Corporate Secretary Ms.
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Prior to that, he was Associate Administrator at the National Aeronautics & Space Administration (NASA), the agency’s highest-ranking civil service position, from March 2012 to April 2018. Jesus Malave (age 55), Chief Financial Officer Mr. Malave has served as Chief Financial Officer since January 31, 2022. Prior to joining Lockheed Martin in 2022, Mr.
Removed
Taiclet has served as Chairman since March 2021 and as President and Chief Executive Officer (CEO) of Lockheed Martin since June 2020. He has served on the Lockheed Martin Board of Directors since January 2018.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod (a) Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (b) (in millions) September 25, 2023 – October 29, 2023 1,265,110 $ 446.24 1,264,627 $ 12,459 October 30, 2023 – November 26, 2023 2,775,003 $ 447.82 2,774,470 $ 11,217 November 27, 2023 – December 31, 2023 2,675,777 $ 446.97 2,669,558 $ 10,023 Total (c) 6,715,890 $ 447.18 6,708,655 (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.
Biggest changePeriod (a) Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (b) (in millions) September 30, 2024 – October 27, 2024 (c) 93,965 $ 566.77 93,082 $ 10,271 October 28, 2024 – November 24, 2024 (c) 990,487 $ 546.85 989,937 $ 9,729 November 25, 2024 – December 31, 2024 (c) 795,125 $ 515.71 786,949 $ 9,323 Total (c) 1,879,577 $ 534.67 1,869,968 (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.
Securities and Exchange Commission or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act), and should not be deemed to be incorporated by reference into any of our prior or subsequent filings under the Securities Act of 1933 or the Exchange Act. 27 Table of Contents Purchases of Equity Securities There were no sales of unregistered equity securities during the quarter ended December 31, 2023.
Securities and Exchange Commission or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act), and should not be deemed to be incorporated by reference into any of our prior or subsequent filings under the Securities Act of 1933 or the Exchange Act. 27 Table of Contents Purchases of Equity Securities There were no sales of unregistered equity securities during the quarter ended December 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 December 31, 2023.
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 December 31, 2024.
The S&P Aerospace & Defense Index comprises The Boeing Company, General Dynamics Corporation, Howmet Aerospace Inc., Huntington Ingalls Industries, L3Harris Technologies, Inc., Lockheed Martin Corporation, Northrop Grumman Corporation, RTX Corporation, Textron Inc. and Transdigm Group Inc. The stockholder return performance indicated on the graph is not a guarantee of future performance.
The S&P Aerospace & Defense Index comprises Axon Enterprise, Inc., General Dynamics Corporation, General Electric Company, Howmet Aerospace Inc., Huntington Ingalls Industries, L3Harris Technologies, Inc., Lockheed Martin Corporation, Northrop Grumman Corporation, RTX Corporation, Textron Inc., The Boeing Company and Transdigm Group Inc. The stockholder return performance indicated on the graph is not a guarantee of future performance.
Stockholder Return Performance Graph The following graph compares the total return on a cumulative basis through December 31, 2023, assuming reinvestment of dividends, of $100 invested in Lockheed Martin common stock as of market close on December 31, 2018 to the Standard and Poor’s (S&P) 500 Index and the S&P Aerospace & Defense Index.
Stockholder Return Performance Graph The following graph compares the total return on a cumulative basis through December 31, 2024, assuming reinvestment of dividends, of $100 invested in Lockheed Martin common stock as of market close on December 31, 2019 to the Standard and Poor’s (S&P) 500 Index and the S&P Aerospace & Defense Index.
As a result, our fiscal months often differ from the calendar months. For example, November 27, 2023 was the first day of our December 2023 fiscal month.
As a result, our fiscal months often differ from the calendar months. For example, November 25, 2024 was the first day of our December 2024 fiscal month.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities At January 19, 2024, we had 22,665 holders of record of our common stock, par value $1 per share. Our common stock is traded on the New York Stock Exchange (NYSE) under the symbol LMT.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities At January 23, 2025, we had 21,751 holders of record of our common stock, par value $1 per share. Our common stock is traded on the New York Stock Exchange (NYSE) under the symbol LMT.
(c) During the fourth quarter of 2023, the total number of shares purchased included 7,235 shares that were transferred to us by employees in satisfaction of tax withholding obligations associated with the vesting of restricted stock units.
(c) During the fourth quarter of 2024, the total number of shares purchased included 9,609 shares that were transferred to us by employees in satisfaction of tax withholding obligations associated with the vesting of restricted stock units.
On October 6, 2023, the Board of Directors authorized an increase to the program by $6.0 billion. The total remaining authorization for future common share repurchases under our share repurchase program was $10.0 billion as of December 31, 2023.
In October 2024, the Board of Directors authorized an increase to the program by $3.0 billion. The total remaining authorization for future common share repurchases under our share repurchase program was $9.3 billion as of December 31, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSee “Note 1 – Organization and Significant Accounting Policies” for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments. 36 Table of Contents Sales and operating profit for each of our business segments were as follows (in millions): 2023 2022 2021 Net sales Aeronautics $ 27,474 $ 26,987 $ 26,748 Missiles and Fire Control 11,253 11,317 11,693 Rotary and Mission Systems 16,239 16,148 16,789 Space 12,605 11,532 11,814 Total net sales $ 67,571 $ 65,984 $ 67,044 Operating profit Aeronautics $ 2,825 $ 2,867 $ 2,800 Missiles and Fire Control 1,541 1,637 1,650 Rotary and Mission Systems 1,865 1,906 2,030 Space 1,158 1,057 1,184 Total business segment operating profit 7,389 7,467 7,664 Unallocated items FAS/CAS pension operating adjustment 1,660 1,709 1,960 Intangible asset amortization expense (247) (248) (285) Severance and other charges (a) (92) (100) (36) Other, net (203) (480) (180) Total unallocated, net 1,118 881 1,459 Total consolidated operating profit $ 8,507 $ 8,348 $ 9,123 (a) See “Consolidated Results of Operations – Severance and Other Charges” discussion above for information on charges related to certain severance and other actions across our organization.
Biggest changeSee “Note 1 – Organization and Significant Accounting Policies” for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments. 36 Table of Contents Sales, cost of sales and operating profit for each of our business segments were as follows (in millions): 2024 2023 2022 Net sales Aeronautics $ 28,618 $ 27,474 $ 26,987 Missiles and Fire Control 12,682 11,253 11,317 Rotary and Mission Systems 17,264 16,239 16,148 Space 12,479 12,605 11,532 Total net sales $ 71,043 $ 67,571 $ 65,984 Cost of sales Aeronautics $ 26,093 $ 24,649 $ 24,110 Missiles and Fire Control 12,277 9,712 9,676 Rotary and Mission Systems 15,391 14,399 14,258 Space 11,308 11,473 10,565 Total cost of sales $ 65,069 $ 60,233 $ 58,609 Operating profit Aeronautics $ 2,523 $ 2,825 $ 2,867 Missiles and Fire Control 413 1,541 1,637 Rotary and Mission Systems 1,921 1,865 1,906 Space 1,226 1,158 1,057 Total business segment operating profit 6,083 7,389 7,467 Unallocated items FAS/CAS pension operating adjustment 1,624 1,660 1,709 Intangible asset amortization expense (247) (247) (248) Impairment and severance charges (a) (87) (92) (100) Other, net (360) (203) (480) Total unallocated, net 930 1,118 881 Total consolidated operating profit $ 7,013 $ 8,507 $ 8,348 (a) See “Consolidated Results of Operations – Severance and Other Charges” discussion above for information on charges related to certain severance and other actions across our organization.
Our RMS business segment continues to experience international interest in the Aegis Ballistic Missile Defense System (Aegis) for which we perform activities in the development, production, modernization, ship integration, test and lifetime support for ships of international customers such as Japan, Spain, Republic of Korea and Australia.
Our RMS business segment continues to experience international interest in the Aegis Ballistic Missile Defense System (Aegis) for which we perform activities in the development, production, modernization, ship integration, test and lifetime support for ships of international customers such as Japan, Spain, the Republic of Korea and Australia.
Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate and are typically referred to as unfavorable profit adjustments.
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.
For example, if we were to determine that the liabilities 49 Table of Contents should be increased by $100 million, the corresponding amount that is probable of future recovery would be increased by approximately $89 million, with the remainder recorded as a charge to earnings.
For example, if we were to determine that the liabilities should be increased by $100 million, the corresponding amount that is probable of future recovery would be increased by 49 Table of Contents approximately $89 million, with the remainder recorded as a charge to earnings.
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.
The reduction in weighted average common shares outstanding 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.
Additionally, the difference between the expected and actual return affects both the funded status of our benefit plans and the calculation of FAS pension expense in subsequent periods. Although the actual return in any specific year likely will differ from the assumption, the average expected return over a long-term future horizon should be approximately equal to the assumption.
The difference between the expected and actual return affects both the funded status of our benefit plans and the calculation of FAS pension expense in subsequent periods. Although the actual return in any specific year likely will differ from the assumption, the average expected return over a long-term future horizon should be approximately equal to the assumption.
Government contracts, including FMS, and are recognized in our cost of sales and net sales. CAS govern the extent to which our pension costs are allocable to and recoverable under contracts with the U.S. Government, including FMS. Pension cost recoveries under CAS occur in different periods from when pension contributions are made in accordance with ERISA.
Government contracts, including FMS, and are recognized in our cost of sales and net sales. CAS rules govern the extent to which our pension costs are allocable to and recoverable under contracts with the U.S. Government, including FMS. Pension cost recoveries under CAS occur in different periods from when pension contributions are made in accordance with ERISA.
Unfavorable items may include the adverse resolution of contractual matters; supply chain disruptions; restructuring charges (except for significant severance actions, which are excluded from segment operating results); reserves for disputes; certain asset impairments; and losses on sales of certain assets.
Unfavorable items include the adverse resolution of contractual matters, supply chain disruptions, restructuring charges (except for significant severance actions, which are excluded from segment operating results), reserves for disputes, certain asset impairments, and losses on sales of certain assets.
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.
The entire amount of free cash flow is not necessarily available for discretionary expenditures, however, because it does not account for certain mandatory expenditures, such as the repayment of maturing debt and future pension contributions.
Finite-lived intangibles are amortized to expense over their applicable useful lives, ranging from five to 20 years, based on the nature of the asset and the underlying pattern of economic benefit as reflected by future net cash inflows. We perform an impairment test of finite-lived intangibles whenever events or changes in circumstances indicate their carrying value may be impaired.
Finite-lived intangibles are amortized to expense over their applicable useful lives, ranging from three to 20 years, based on the nature of the asset and the underlying pattern of economic benefit as reflected by future net cash inflows. We perform an impairment test of finite-lived intangibles whenever events or changes in circumstances indicate their carrying value may be impaired.
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. 44 Table of Contents Contractual Commitments At December 31, 2023, we had contractual commitments to repay debt, make payments under operating leases, settle obligations related to agreements to purchase goods and services and settle tax and other liabilities.
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. 44 Table of Contents Contractual Commitments At December 31, 2024, we had contractual commitments to repay debt, make payments under operating leases, settle obligations related to agreements to purchase goods and services and settle tax and other liabilities.
At December 31, 2023 and 2022, there were no material amounts recorded in our financial statements related to third-party guarantees or novation agreements. Critical Accounting Policies Our consolidated financial statements are prepared in conformity with U.S. GAAP, which requires us to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements.
At December 31, 2024 and 2023, there were no material amounts recorded in our financial statements related to third-party guarantees or novation agreements. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in conformity with U.S. GAAP, which requires us to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements.
We also may explore the divestiture of businesses, investments or ventures that no longer meet our needs or strategy or that could perform better outside of our organization or with a different owner. In pursuing our business strategy, we routinely conduct discussions, evaluate targets and enter into agreements regarding possible acquisitions, divestitures, joint ventures and equity investments. U.S.
We also may explore the divestiture of businesses, investments or ventures that no longer meet our needs or strategy or that could perform better outside of our organization or with a different owner. In pursuing our business strategy, we routinely conduct discussions, evaluate targets and enter into agreements regarding possible acquisitions, divestitures, joint ventures and equity investments.
Such agreements and contracts may, for example, be related to direct materials, obligations to subcontractors and outsourcing arrangements. Total purchase obligations for operating activities in the preceding table include approximately $57.3 billion related to contractual commitments entered into as a result of contracts we have with our U.S. Government customers. The U.S.
Such agreements and contracts may, for example, be related to direct materials, obligations to subcontractors and outsourcing arrangements. Total purchase obligations for operating activities in the preceding table include approximately $64.3 billion related to contractual commitments entered into as a result of contracts we have with our U.S. Government customers. The U.S.
Our MFC business segment continues to generate significant international interest, most notably in the air and missile defense product line, which produces the PAC-3 and Terminal High Altitude Area Defense (THAAD) systems. Fifteen nations have chosen PAC-3 Cost Reduction Initiative (CRI) and PAC-3 Missile Segment Enhancement (MSE) to provide missile defense capabilities.
Our MFC business segment continues to generate significant international interest, most notably in the air and missile defense product line, which produces the PAC-3 and Terminal High Altitude Area Defense (THAAD) systems. Seventeen nations have chosen PAC-3 Cost Reduction Initiative (CRI) and PAC-3 Missile Segment Enhancement (MSE) to provide missile defense capabilities.
For additional information about obligations and our future minimum contribution requirements for these plans, see “Note 11 – Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements. Amounts related to other liabilities represent the contractual obligations for certain long-term liabilities recorded as of December 31, 2023.
For additional information about obligations and our future minimum contribution requirements for these plans, see “Note 11 – Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements. Amounts related to other liabilities represent the contractual obligations for certain long-term liabilities recorded as of December 31, 2024.
The termination for convenience language also may be included in contracts with foreign, state and local governments. We also have contracts with customers that do not include termination for convenience provisions, including contracts with commercial customers. The majority of our capital expenditures for 2023 and those planned for 2024 are for equipment, facilities infrastructure and information technology.
The termination for convenience language also may be included in contracts with foreign, state and local governments. We also have contracts with customers that do not include termination for convenience provisions, including contracts with commercial customers. The majority of our capital expenditures for 2024 and those planned for 2025 are for equipment, facilities infrastructure and information technology.
(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.
(federal or state) or foreign tax laws and regulations, or their interpretation and application (including those with retroactive effect), such as the amortization for research and development expenditures, could significantly impact our provision for income taxes, the amount of taxes payable, our deferred tax asset and liability balances, and stockholders’ equity.
These cumulative actuarial losses will be amortized to expense using the corridor method, where gains and losses are recognized to the extent they exceed 10% of the greater of plan assets or benefit obligations, over an average period of approximately twenty years as of December 31, 2023.
These cumulative actuarial losses will be amortized to expense using the corridor method, where gains and losses are recognized to the extent they exceed 10% of the greater of plan assets or benefit obligations, over an average period of approximately twenty years as of December 31, 2024.
Favorable items may include the positive resolution of contractual matters, cost recoveries on severance and restructuring, insurance recoveries and gains on sales of assets.
Favorable items include the positive resolution of contractual matters, cost recoveries on severance and restructuring, insurance recoveries and gains on sales of assets.
Business Overview We are a global security and aerospace company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. We also provide a broad range of management, engineering, technical, scientific, logistics, system integration and cybersecurity services.
Business Overview We are a global aerospace and defense company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. We also provide a broad range of management, engineering, technical, scientific, logistics, system integration and cybersecurity services.
All of our qualified defined benefit pension plans had an ERISA funded status of at least 80% as of both December 31, 2023 and 2022. Contributions to our defined benefit pension plans are recovered over time through the pricing of our products and services on U.S.
All of our qualified defined benefit pension plans had an ERISA funded status of at least 80% as of both December 31, 2024 and 2023. Contributions to our defined benefit pension plans are recovered over time through the pricing of our products and services on U.S.
The MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and notes thereto included in Item 8 - Financial Statements and Supplementary Data. The MD&A generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
The MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and notes thereto included in Item 8 - Financial Statements and Supplementary Data. The MD&A generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
The amounts above in the table represent the portion of expected capital expenditures to be incurred in 2024 and beyond that have been obligated under contracts as of December 31, 2023 and not necessarily total capital expenditures for future periods.
The amounts above in the table represent the portion of expected capital expenditures to be incurred in 2025 and beyond that have been obligated under contracts as of December 31, 2024 and not necessarily total capital expenditures for future periods.
Government, either as a prime contractor or as a subcontractor (including 64% from the Department of Defense (DoD)), 26% 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.
Government, either as a prime contractor or as a subcontractor (including 65% from the Department of Defense (DoD)), 26% 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.
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 $1.2 billion in 2023, compared to $1.0 billion in 2022.
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 $1.0 billion in 2024, compared to $1.2 billion in 2023.
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.
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 portions of the Federal Acquisition Regulation (FAR), and other items not considered part of management’s evaluation of segment operating performance.
We also will continue to evaluate our portfolio and will make strategic acquisitions or divestitures, as appropriate, while deepening our connection to commercial industry through cooperative partnerships, joint ventures and equity investments. Portfolio Shaping Activities We continuously strive to strengthen our portfolio of products and services to meet the current and future needs of our customers.
We also will continue to evaluate our portfolio and will make strategic acquisitions or divestitures, as appropriate, while deepening our connection to commercial industry through cooperative partnerships, joint ventures and equity investments. 29 Table of Contents Portfolio Shaping Activities We continuously strive to strengthen our portfolio of products and services to meet the current and future needs of our customers.
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.
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, and is a performance goal in our annual and long-term incentive plans.
To the extent we have entered into purchase or other obligations at December 31, 2023 that also satisfy offset agreements, those amounts are included in the contractual commitments table above.
To the extent we have entered into purchase or other obligations at December 31, 2024 that also satisfy offset agreements, those amounts are included in the contractual commitments table above.
Operating profit for our Space business segment includes our share of earnings for our investment in ULA, which provides expendable launch services to the U.S. Government and commercial customers.
Operating profit for our Space business segment includes our share of earnings for our investment in United Launch Alliance (ULA), which provides expendable launch services to the U.S. Government and commercial customers.
We accomplish this in part by our independent research and development activities and through acquisition, divestiture and internal realignment activities. 29 Table of Contents We selectively pursue the acquisition of businesses, investments and ventures at attractive valuations that will expand or complement our current portfolio and allow access to new customers or technologies.
We accomplish this in part by our independent research and development activities and through acquisition, divestiture and internal realignment activities. We selectively pursue the acquisition of businesses, investments and ventures at attractive valuations that will expand or complement our current portfolio and allow access to new customers or technologies.
If the asset group’s carrying amount exceed the sum of the undiscounted future cash flows, we would determine the fair value of the asset group and record an impairment loss in net earnings.
If the asset group’s carrying amount exceeded the sum of the undiscounted future cash flows, we would determine the fair value of the asset group and record an impairment loss in net earnings.
Offset programs usually extend over several years and may provide for penalties, estimated at approximately $2.3 billion at December 31, 2023, in the event we fail to perform in accordance with offset requirements. While historically we have not been required to pay material penalties, resolution of offset requirements are often the result of negotiations and subjective judgments.
Offset programs usually extend over several years and may provide for penalties, estimated at approximately $2.1 billion at December 31, 2024, in the event we fail to perform in accordance with offset requirements. While historically we have not been required to pay material penalties, resolution of offset requirements are often the result of negotiations and subjective judgments.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results or Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on January 26, 2023.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results or Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on January 23, 2024.
Each year, differences between the actual and expected long-term rate of return on plan assets impacts the measurement of the following year’s FAS pension income.
Each year, differences between the actual and expected long-term rate of return on plan assets impacts the measurement of the following year’s FAS pension expense.
Our vision for 21st Century Security is to accelerate the adoption of advanced networking and leading-edge technologies into our national defense enterprise, while enhancing the performance and value of our platforms and products for our customers.
Our 21st Century Security ® vision is to accelerate the adoption of advanced networking and other leading-edge technologies into the American defense enterprise, while enhancing the performance and value of our platforms and products for our customers.
The rates for all periods benefited from research and development tax credits, tax deductions for foreign derived intangible income, dividends paid to our defined contribution plans with an employee stock ownership plan feature and employee equity awards. Changes in U.S.
The rates for all periods benefited from tax deductions for foreign derived intangible income, research and development tax credits, dividends paid to our defined contribution plans with an employee stock ownership plan feature and employee equity awards. 35 Table of Contents Changes in U.S.
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 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 38 Table of Contents cooperation agreements, sometimes referred to as offset or localization agreements, required under certain contracts with international customers).
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.
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 objective of procuring 2,456 aircraft for the U.S. Air Force, U.S. Marine Corps, and U.S. Navy.
Intangible assets from acquired businesses are recognized at fair value on the acquisition date and consist of customer programs, trademarks, customer relationships, technology and other intangible assets. Customer programs include values assigned to major programs of acquired businesses and represent the aggregate value associated with the customer relationships, contracts, technology and trademarks underlying the associated program.
Intangible assets from acquired businesses are recognized at fair value on the acquisition date and consist of customer programs, trademarks, customer relationships, technology and other intangible assets. Customer programs includes values assigned to major programs of acquired businesses and represents the aggregate value associated with the customer relationships, contracts, technology and trademarks underlying the associated program.
Key to enabling success of our strategy is developing differentiating technologies, forging strategic partnerships, including with commercial companies, executing on our multi-year business transformation initiative to enhance our digital infrastructure and increase efficiencies and collaboration throughout our business and maintaining fiscal discipline. Underpinning our ability to execute our strategy is our talent and culture.
Keys to enabling success of our strategy include developing and investing in differentiating technologies, forging strategic partnerships, including with commercial companies, executing on our multi-year business transformation initiative to enhance our digital infrastructure and increase efficiencies and collaboration throughout our business and maintaining fiscal discipline. Underpinning our ability to execute our strategy is our talent and culture.
Additionally, acquired intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment testing or more frequently if events or change in circumstance indicate that it is more likely than not that the asset is impaired.
Additionally, acquired intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment testing or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.
The increase in interest expense in 2023 resulted primarily from the issuance of senior unsecured notes in May 2023 and October 2022. See “Capital Structure, Resources and Other” included within the “Liquidity and Cash Flows” discussion below and “Note 10 – Debt” included in our Notes to Consolidated Financial Statements for a discussion of our debt.
The increase in interest expense in 2024 resulted primarily from the issuance of senior unsecured notes in December 2024, January 2024 and May 2023. See “Capital Structure, Resources and Other” included within the “Liquidity and Cash Flows” discussion below and “Note 10 – Debt” included in our Notes to Consolidated Financial Statements for a discussion of our debt.
We continue to use a single weighted average discount rate approach when calculating our consolidated benefit obligations related to our defined benefit pension plans resulting in 5.00% at December 31, 2023, compared to 5.25% at December 31, 2022.
We continue to use a single weighted average discount rate approach when calculating our consolidated benefit obligations related to our defined benefit pension plans resulting in 5.625% at December 31, 2024, compared to 5.00% at December 31, 2023.
In October 2023, the Board of Directors authorized a fourth quarter dividend payment of $3.15 per share, representing an increase of $0.15 per share over the prior quarterly dividend payment. The Board of Directors also authorized an increase of $6.0 billion to our share repurchase program.
In October 2024, the Board of Directors authorized a fourth quarter dividend payment of $3.30 per share, representing an increase of $0.15 per share over the prior quarterly dividend payment. The Board of Directors also authorized an increase of $3.0 billion to our share repurchase program in October 2024.
We utilized a single weighted average discount rate of 5.00% when calculating our benefit obligations related to our retiree medical and life insurance plans at December 31, 2023, compared to 5.25% at December 31, 2022.
We utilized a single weighted average discount rate of 5.50% when calculating our benefit obligations related to our retiree medical and life insurance plans at December 31, 2024, compared to 5.00% at December 31, 2023.
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. In 2023, 73% of our $67.6 billion in net sales were from the U.S.
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. In 2024, 73% of our $71.0 billion in net sales were from the U.S.
Our total outstanding short-term and long-term debt, net of unamortized discounts and issuance costs, was $17.5 billion as of December 31, 2023 and is in the form of publicly-issued notes that bear interest at fixed rates. As of December 31, 2023, we were in compliance with all covenants contained in our debt and credit agreements.
Our total outstanding short-term and long-term debt, net of unamortized discounts and issuance costs, was $20.3 billion as of December 31, 2024 and is in the form of publicly issued notes that bear interest at fixed rates. As of December 31, 2024, we were in compliance with all covenants contained in our debt and credit agreements.
Other areas of international expansion at our Aeronautics business segment include the F-16 and C-130J programs, which continue to draw interest from international customers for new aircraft. In 2023, international customers accounted for 31% of MFC’s net sales.
Other areas of 31 Table of Contents international expansion at our Aeronautics business segment include the F-16 and C-130J programs, which continue to draw interest from international customers for new aircraft. In 2024, international customers accounted for 29% of MFC’s net sales.
Backlog At December 31, 2023, our backlog was $160.6 billion compared with $150.0 billion at December 31, 2022. Backlog is converted into sales in future periods as work is performed or deliveries are made.
Backlog At December 31, 2024, our backlog was $176.0 billion compared with $160.6 billion at December 31, 2023. Backlog is converted into sales in future periods as work is performed or deliveries are made.
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. 37 Table of Contents The total FAS/CAS pension adjustments, including the service and non-service cost components of FAS pension income (expense) for our qualified defined benefit pension plans, were as follows (in millions): 2023 2022 2021 Total FAS income (expense) and CAS cost FAS pension income (expense) $ 378 $ (1,058) $ (1,398) Less: CAS pension cost 1,725 1,796 2,066 Total FAS/CAS pension adjustment $ 2,103 $ 738 $ 668 Service and non-service cost reconciliation FAS pension service cost $ (65) $ (87) $ (106) Less: CAS pension cost 1,725 1,796 2,066 Total FAS/CAS pension operating adjustment 1,660 1,709 1,960 Non-service FAS pension income (expense) 443 (971) (1,292) Total FAS/CAS pension adjustment $ 2,103 $ 738 $ 668 The total FAS/CAS pension adjustment in 2022 reflects a noncash, non-operating pension settlement charge of $1.5 billion ($1.2 billion, or $4.33 per share, after-tax) recognized in connection with the transfer of $4.3 billion of our gross defined benefit pension obligations and related plan assets to an insurance company in the second quarter of 2022.
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. 37 Table of Contents The total FAS/CAS pension adjustments, including the service and non-service cost components of FAS pension income (expense) for our qualified defined benefit pension plans, were as follows (in millions): 2024 2023 2022 Total FAS income (expense) and CAS cost FAS pension income (expense) $ 2 $ 378 $ (1,058) Less: CAS pension cost 1,684 1,725 1,796 Total FAS/CAS pension adjustment $ 1,686 $ 2,103 $ 738 Service and non-service cost reconciliation FAS pension service cost $ (60) $ (65) $ (87) Less: CAS pension cost 1,684 1,725 1,796 Total FAS/CAS pension operating adjustment 1,624 1,660 1,709 Non-service FAS pension income (expense) 62 443 (971) Total FAS/CAS pension adjustment $ 1,686 $ 2,103 $ 738 The total FAS/CAS pension adjustment in 2022 reflects a noncash, non-operating pension settlement charge of $1.5 billion ($1.2 billion, or $4.33 per share, after-tax) recognized in connection with the transfer of $4.3 billion of our gross defined benefit pension obligations and related plan assets to an insurance company in the second quarter of 2022.
Our goal has been to fund each of our qualified defined benefit pension plans to a level of at least 80% as determined in accordance with ERISA; which may require the use of different assumptions, such as the discount rate and longevity, than used under GAAP.
The funded status under ERISA is calculated on a different basis than under GAAP. Our goal has been to fund each of our qualified defined benefit pension plans to a level of at least 80% as determined in accordance with ERISA; which may require the use of different assumptions, such as the discount rate and longevity, than used under GAAP.
Backlog Backlog increased in 2023 compared to 2022 primarily due to higher orders on Sikorsky programs. Space Our Space business segment is engaged in the research and design, development, engineering and production of satellites, space transportation systems, and strategic, advanced strike and defensive systems.
Backlog Backlog increased in 2024 compared to 2023 primarily due to higher orders on IWSS and C6ISR programs. Space Our Space business segment is engaged in the research and design, development, engineering and production of satellites, space transportation systems, and strategic, advanced strike and defensive systems.
During 2023, we paid $6.0 billion to repurchase 13.4 million shares of our common stock. See “Note 12 – Stockholders’ Equity” included in our Notes to Consolidated Financial Statements for additional information. During 2022, we paid $7.9 billion to repurchase 18.3 million shares of our common stock.
During 2024, we paid $3.7 billion to repurchase 7.5 million shares of our common stock. See “Note 12 – Stockholders’ Equity” included in our Notes to Consolidated Financial Statements for additional information. During 2023, we paid $6.0 billion to repurchase 13.4 million shares of our common stock.
We recovered $1.7 billion in 2023 and $1.8 billion in 2022 as CAS pension costs. Amounts contributed in excess of the CAS pension costs recovered under U.S. Government contracts are considered to be prepayment credits under the CAS rules. Our prepayment credits were approximately $2.9 billion and $4.3 billion at December 31, 2023 and 2022.
We recovered $1.7 billion in both 2024 and 2023 as CAS pension costs. Amounts contributed in excess of the CAS pension costs recovered under U.S. Government contracts are considered to be prepayment credits under the CAS rules. Our prepayment credits were approximately $2.2 billion and $2.9 billion at December 31, 2024 and 2023.
A change of plus or minus 25 basis points in the 5.00% discount rate assumption at December 31, 2023, with all other assumptions held constant, would have decreased or increased the amount of the qualified pension benefit obligation we recorded at the end of 2023 by approximately $765 million, which would result in an after-tax increase or decrease in stockholders’ equity at the end of the year of approximately $600 million.
A change of plus or minus 25 basis points in the 5.625% discount rate assumption at December 31, 2024, with all other assumptions held constant, would have decreased or increased the amount of the qualified pension benefit obligation we recorded at the end of 2024 by approximately $725 million, which would result in an after-tax increase or decrease in stockholders’ equity at the end of the year of approximately $575 million.
During 2023, $149 million of these amounts, along with amortization of net prior service credit, were recognized as a component of postretirement benefit plan expense. The discount rate and long-term rate of return on plan assets assumptions we select at the end of each year are based on our best estimates and judgment.
During 2024, $76 million of these amounts, inclusive of amortization of net prior service credit, were recognized as a component of postretirement benefit plan expense. The discount rate and long-term rate of return on plan assets assumptions we select at the end of each year are based on our best estimates and judgment.
If the 6.50% expected long-term rate of return on plan assets assumption at December 31, 2023 that was used to compute the expected 2024 FAS pension income for our qualified defined benefit pension plans had been 25 basis points higher or lower, with all other assumptions held constant, the amount of FAS 48 Table of Contents pension income projected for 2024 would be higher or lower by approximately $60 million.
If the 6.50% expected long-term rate of return on plan assets assumption at December 31, 2024 that was used to compute the expected 2025 FAS pension expense for our qualified defined benefit pension plans had been 25 basis points higher or lower, with all other assumptions held constant, the amount of FAS pension expense projected for 2025 would be lower or higher by approximately $55 million.
RMS’ major programs include Aegis Combat System, Littoral Combat Ship (LCS), Multi-Mission Surface Combatant (MMSC), Black Hawk and Seahawk helicopters, 40 Table of Contents CH-53K King Stallion heavy lift helicopter, Combat Rescue Helicopter (CRH), VH-92A helicopter, and the C2BMC program.
RMS’ major programs include Aegis Combat System, Littoral Combat Ship (LCS), Multi-Mission Surface Combatant (MMSC), Canadian Surface Combatant (CSC), Black Hawk and Seahawk helicopters, CH-53K King Stallion heavy lift helicopter, Combat Rescue Helicopter (CRH), VH-92A helicopter, and the C2BMC program.
The Organization for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2), with certain aspects of Pillar 2 effective January 1, 2024 and other aspects effective January 1, 2025.
The Organisation for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% applied on a country-by-country basis for companies with global revenues and profits above certain thresholds (referred to as Pillar 2), with certain aspects of Pillar 2 effective January 1, 2024 and other aspects effective January 1, 2025.
At December 31, 2023, the notional value of remaining obligations under our outstanding offset agreements totaled approximately $21.3 billion, which primarily relate to our Aeronautics, MFC and RMS business segments, most of which extend through 2044.
At December 31, 2024, the notional value of remaining obligations under our outstanding offset agreements totaled approximately $19.1 billion, which primarily relate to our Aeronautics, MFC and RMS business segments, most of which extend through 2044.
For performance obligations to deliver products with continuous 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. Significant estimates and assumptions are made in estimating contract sales, costs, and profit.
For performance obligations in which control transfers continuously 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. Significant estimates and assumptions are made in estimating contract sales, costs, and profit.
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 increased approximately $849 million, or 2%, in 2023 as compared to 2022.
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 increased approximately $4.6 billion, or 9%, in 2024 as compared to 2023.
Intangible assets are amortized over a period of expected cash flows used to measure fair value, which typically ranges from five to 20 years. Our goodwill balance was $10.8 billion at both December 31, 2023 and 2022.
Intangible assets are amortized over a period of expected cash flows used to measure fair value, which typically ranges from three to 20 years. Our goodwill balance was $11.1 billion and $10.8 billion at December 31, 2024 and 2023.
Net earnings and earnings per share in 2023 were affected by the factors mentioned above. Earnings per share also benefited from a net decrease of approximately 13.4 million weighted average common shares outstanding in 2023, compared to 2022.
Net earnings and earnings per share in 2024 were affected by the factors mentioned above. Earnings per share also benefited from a net decrease of approximately 12.0 million weighted average common shares outstanding in 2024 compared to 2023.
If the 5.00% discount rate at December 31, 2023 that was used to compute the expected 2024 FAS pension income for our qualified defined benefit pension plans had been 25 basis points higher or lower, with all other assumptions held constant, the amount of FAS pension income projected for 2024 would change approximately $5 million.
If the 5.625% discount rate at December 31, 2024 that was used to compute the expected 2025 FAS pension expense for our qualified defined benefit pension plans had been 25 basis points higher or lower, with all other assumptions held constant, the amount of FAS pension expense projected for 2025 would be lower or higher by approximately $5 million.
The decrease in the discount rate from December 31, 2022 to December 31, 2023 resulted in an increase in the projected benefit obligations of our qualified defined benefit pension plans of approximately $765 million at December 31, 2023. We utilized an expected long-term rate of return on plan assets of 6.50% at both December 31, 2023 and December 31, 2022.
The increase in the discount rate from December 31, 2023 to December 31, 2024 resulted in a decrease in the projected benefit obligations of our qualified defined benefit pension plans of approximately $1.8 billion at December 31, 2024. We utilized an expected long-term rate of return on plan assets of 6.50% at both December 31, 2024 and December 31, 2023.
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 the products and services offered. We operate in a complex and evolving global security environment.
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 the products and services offered.
Government and other customers in future periods, which will be included in our operating results. 34 Table of Contents 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), 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.
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 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.
We have multiple programs of record from each business segment that are entering growth stages, including the F-35 sustainment activity (Aeronautics); increased Patriot Advanced Capability-3 (PAC-3) production rates and increased demand for High Mobility Artillery Rocket System (HIMARS ® ) and Guided Multiple Launch Rocket Systems (GMLRS) (Missiles and Fire Control); radar surveillance systems and CH-53K King Stallion heavy lift helicopter (Rotary and Mission Systems); and the modernization and enhancements to the Trident II D5 Fleet Ballistic Missile (FBM) (Space).
We have well established programs across our business segments that continue to experience growth, including F-35 sustainment activity (Aeronautics); increased Patriot Advanced Capability-3 (PAC-3) production rates and increased demand for High Mobility Artillery Rocket System (HIMARS ® ) and Guided Multiple Launch Rocket Systems (GMLRS) (Missiles and Fire Control); radar surveillance systems and CH-53K King Stallion heavy lift helicopter (Rotary and Mission Systems); and the modernization of and enhancements to the Trident II D5 Fleet Ballistic Missile (FBM) (Space).
At December 31, 2023, third-party guarantees totaled $1.0 billion, of which approximately 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.
At December 31, 2024, third-party guarantees totaled $351 million, of which approximately 30% 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.
Increases or decreases in profit booking rates are recognized in the current period they are determined and reflect the inception-to-date effect of such changes. Segment operating profit and margin may also be impacted favorably or unfavorably by other items, which may or may not impact sales.
Increases or decreases in profit booking rates are recognized in the period they are determined and reflect the inception-to-date effect of such changes. Segment operating profit and margin can be impacted favorably or unfavorably by, for example, certain items listed below, which may or may not impact sales.
We paid quarterly dividends of $3.00 per share during each of the first three quarters of 2023 and $3.15 per share during the fourth quarter of 2023; $2.80 per share during each of the first three quarters of 2022 and $3.00 per share during the fourth quarter of 2022.
We paid quarterly dividends of $3.15 per share during each of the first three quarters of 2024 and $3.30 per share during the fourth quarter of 2024; $3.00 per share during each of the first three quarters of 2023 and $3.15 per share during the fourth quarter of 2023.
This testing compares carrying value to fair value and, when appropriate, the carrying value of these assets is reduced to fair value. In the fourth quarter of 2023, we performed our annual impairment tests, and the results of those tests indicated no impairment existed.
This testing compares carrying value to fair value and, when appropriate, the carrying value of these assets is reduced to fair value. In the fourth quarter of 2024, we performed our annual goodwill impairment test for each of our reporting units, and the results of those tests indicated no impairment existed.
To accomplish this growth, we continue to focus on strengthening our relationships internationally through partnerships and joint technology efforts. Our international business is conducted either by foreign military sales (FMS) contracted through the U.S. Government or by direct commercial sales (DCS) to international customers.
To accomplish this growth, we continue to focus on strengthening our relationships internationally through partnerships and joint technology efforts. Our international business is conducted either by FMS contracted through the U.S. Government or by direct commercial sales (DCS) to international customers. In 2024, approximately 73% of our sales to international customers were FMS and about 27% were DCS.
The actual investment return for our qualified defined benefit plans during 2023 was approximately 7.00% . Our stockholders’ equity has been reduced cumulatively by $8.7 billion from the annual year-end measurements of the funded status of postretirement benefit plans. The cumulative noncash, after-tax reduction primarily represents net actuarial losses resulting from changes in discount rates, investment experience, and updated longevity.
Our stockholders’ equity has been reduced cumulatively by $8.3 billion from the annual year-end measurements of the funded status of postretirement benefit plans. The cumulative noncash, after-tax reduction primarily represents net actuarial losses resulting from changes in discount rates, investment experience, and updated longevity.
Our consolidated net sales were as follows (in millions): 2023 2022 2021 Products $ 56,265 $ 55,466 $ 56,435 % of total net sales 83.3 % 84.1 % 84.2 % Services 11,306 10,518 10,609 % of total net sales 16.7 % 15.9 % 15.8 % Total net sales $ 67,571 $ 65,984 $ 67,044 Substantially all of our contracts are accounted for using the percentage-of-completion cost-to-cost method.
Our consolidated net sales were as follows (in millions): 2024 2023 2022 Products $ 59,277 $ 56,265 $ 55,466 % of total net sales 83.4 % 83.3 % 84.1 % Services 11,766 11,306 10,518 % of total net sales 16.6 % 16.7 % 15.9 % Total net sales $ 71,043 $ 67,571 $ 65,984 Substantially all of our contracts are accounted for using the percentage-of-completion cost-to-cost method.
Our consolidated results of operations were as follows (in millions, except per share data): 2023 2022 2021 Net sales $ 67,571 $ 65,984 $ 67,044 Cost of sales (59,092) (57,697) (57,983) Gross profit 8,479 8,287 9,061 Other income, net 28 61 62 Operating profit 8,507 8,348 9,123 Interest expense (916) (623) (569) Non-service FAS pension income (expense) 443 (971) (1,292) Other non-operating income (expense), net 64 (74) 288 Earnings before income taxes 8,098 6,680 7,550 Income tax expense (1,178) (948) (1,235) Net earnings $ 6,920 $ 5,732 $ 6,315 Diluted earnings per common share $ 27.55 $ 21.66 $ 22.76 Certain amounts reported in other income (expense), net, including our share of earnings or losses from equity method investees, are included in the operating profit of our business segments.
Our consolidated results of operations were as follows (in millions, except per share data): 2024 2023 2022 Net sales $ 71,043 $ 67,571 $ 65,984 Cost of sales (64,113) (59,092) (57,697) Gross profit 6,930 8,479 8,287 Other income, net 83 28 61 Operating profit 7,013 8,507 8,348 Interest expense (1,036) (916) (623) Non-service FAS pension income (expense) 62 443 (971) Other non-operating income (expense), net 181 64 (74) Earnings before income taxes 6,220 8,098 6,680 Income tax expense (884) (1,178) (948) Net earnings $ 5,336 $ 6,920 $ 5,732 Diluted earnings per common share $ 22.31 $ 27.55 $ 21.66 Certain amounts reported in other income, net, including our share of earnings or losses from equity method investees, are included in the operating profit of our business segments.
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.
The operating results of these classified programs are included in our consolidated and business segment results and are subject to the same oversight and internal controls as our other programs. 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur 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 foreign currency transactions in order to minimize fluctuations in our earnings and cash flows associated with changes in foreign currency exchange rates.
Biggest changeWe designate foreign currency hedges as cash flow hedges. We enter into foreign currency hedges such as forward and option contracts that change in value as foreign currency exchange rates change. Our most significant foreign currency exposures relate to the British pound sterling, the euro, the Canadian dollar, the Australian dollar, the Norwegian kroner and the Polish zloty.
A 10% change in the level of interest rates would not have a material impact on the fair value of our outstanding debt at December 31, 2023. We use derivative instruments principally to reduce our exposure to market risks from changes in foreign currency exchange rates and interest rates.
A 10% change in the level of interest rates would not have a material impact on the fair value of our outstanding debt at December 31, 2024. We use derivative instruments principally to reduce our exposure to market risks from changes in foreign currency exchange rates and interest rates.
As of December 31, 2023, investments in the trust totaled $1.8 billion and are reflected at fair value on our consolidated balance sheet in other noncurrent assets. The trust holds investments in marketable equity securities and fixed-income securities that are exposed to price changes and changes in interest rates.
As of December 31, 2024, investments in the trust totaled $1.8 billion and are reflected at fair value on our consolidated balance sheet in other noncurrent assets. The trust holds investments in marketable equity securities and fixed-income securities that are exposed to price changes and changes in interest rates.
Changes in the fair value of the derivatives that are not highly effective, if any, are immediately recognized in earnings. The aggregate notional amount of our outstanding interest rate swaps was $1.3 billion at both December 31, 2023 and 2022.
Changes in the fair value of the derivatives that are not highly effective, if any, are immediately recognized in earnings. The aggregate notional amount of our outstanding interest rate swaps was $1.3 billion at both December 31, 2024 and 2023.
Both the change in the fair value of the trust and the change in the value of the liabilities are recognized on our consolidated statements of earnings in other unallocated, net and were not material for the year ended December 31, 2023. 52 Table of Contents
Both the change in the fair value of the trust and the change in the value of the liabilities are recognized on our consolidated statements of earnings in other unallocated, net and were not material for the year ended December 31, 2024. 52 Table of Contents
We closely monitor the financial market environment and actively manage counterparty exposure to minimize the potential impact from adverse developments with any single credit provider while ensuring availability of, and access to, sufficient credit resources. Our main exposure to market risk relates to interest rates, foreign currency exchange rates and market prices on certain equity securities.
We closely monitor the financial market environment and actively manage counterparty exposure to minimize the potential impact from adverse developments with any single credit provider while ensuring availability of, and access to, sufficient credit resources. Our main exposures to market risk relate to interest rates, foreign currency exchange rates and market prices on certain equity securities.
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.
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.
The aggregate notional amount of our outstanding foreign currency hedges at December 31, 2023 and 2022 was $6.5 billion and $7.3 billion. At December 31, 2023 and 2022, the net fair value of our derivative instruments was not material (see “Note 15 – Fair Value Measurements” included in our Notes to Consolidated Financial Statements).
The aggregate notional amount of our outstanding foreign currency hedges at December 31, 2024 and 2023 was $7.5 billion and $6.5 billion. At December 31, 2024 and 2023, the net fair value of our derivative instruments was not material (see “Note 15 – Fair Value Measurements” included in our Notes to Consolidated Financial Statements).
Our financial instruments that are subject to interest rate risk principally include fixed-rate long-term debt and commercial paper, if issued. The estimated fair value of our outstanding debt was $18.5 billion at December 31, 2023 and the outstanding principal amount of debt, including short-term and long-term debt, was $18.7 billion, excluding unamortized discounts and issuance costs of $1.3 billion.
Our financial instruments that are subject to interest rate risk principally include fixed-rate long-term debt and commercial paper, if issued. The estimated fair value of our outstanding debt was $20.2 billion at December 31, 2024 and the outstanding principal amount of debt, including short-term and long-term debt, was $21.6 billion, excluding unamortized discounts and issuance costs of $1.3 billion.
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.
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.
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.
We transact business globally and are subject to risks associated with changing foreign currency exchange rates. We do not enter into or hold derivative instruments for speculative trading purposes. These contracts hedge forecasted foreign currency transactions in order to minimize fluctuations in our earnings and cash flows associated with changes in foreign currency exchange rates.

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