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What changed in Lockheed Martin's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Lockheed Martin's 2024 and 2025 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 2025 report.

+438 added−474 removedSource: 10-K (2026-01-29) vs 10-K (2025-01-28)

Top changes in Lockheed Martin's 2025 10-K

438 paragraphs added · 474 removed · 343 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeNavy for the only submarine-launched intercontinental ballistic missile currently in production in the U.S. • The Orion Multi-Purpose Crew Vehicle (Orion), a spacecraft for NASA utilizing new technology for human exploration missions beyond low earth orbit. • Next Generation Interceptor (NGI), a program with the Missile Defense Agency (MDA) utilizing next generation propulsion and sensors to provide homeland missile defense. • Global Positioning System (GPS) III, a program to modernize the GPS satellite system for the U.S.
Biggest changeSpace Force with enhanced worldwide missile warning capabilities. • Next Generation Interceptor (NGI), a program with the Missile Defense Agency (MDA) utilizing next generation propulsion and sensors to provide homeland missile defense. • The Orion Multi-Purpose Crew Vehicle (Orion), NASA’s next generation exploration-class crewed vehicle for human exploration to the Moon and throughout the solar system. • Global Positioning System (GPS) III, a program to modernize the GPS satellite system for the U.S.
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.
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 2026.
Our broad portfolio of products and services competes domestically and internationally against products and services of the companies listed above, numerous smaller competitors and startups, and increasingly, non-traditional and non-U.S. defense contractors. In some areas of our business, customer requirements are changing to encourage or facilitate expanded competition.
Our broad portfolio of products and services competes domestically and internationally against products and services of the companies listed above, numerous smaller competitors and startups, and increasingly, non-traditional and non-U.S. defense contractors. In some areas of our business, customer requirements and acquisition processes are changing to encourage or facilitate expanded competition.
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.
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 2025.
Government and international customers designed to engage targets both within and outside of the Earth’s atmosphere. • The Multiple Launch Rocket System (MLRS), Precision Strike Missile (PrSM), Joint Air-to-Surface Standoff Missile (JASSM), Long Range Anti-Ship Missile (LRASM), and Hellfire tactical and strike missile programs.
Government and international customers designed to engage targets both within and outside of the Earth’s atmosphere. • The Multiple Launch Rocket System (MLRS), Precision Strike Missile (PrSM), Joint Air-to-Surface Standoff Missile (JASSM), Long Range Anti-Ship Missile (LRASM), Hellfire and Joint Air-to-Ground Missile (JAGM) tactical and strike missile programs.
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.
We have a distributed 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 tuition assistance for continuing education or industry certifications.
The U.S. Government and in limited cases certain other governments may terminate any of our government contracts and subcontracts either at their convenience or for default based on our performance. If a contract is terminated for convenience, we generally are protected by provisions covering reimbursement for costs incurred on the contract and profit on those costs.
The U.S. Government and in limited cases certain other governments may terminate any of our government contracts and subcontracts either at their convenience or for default based on our performance. If a contract is terminated for convenience, we generally are protected by provisions covering reimbursement for costs incurred on the contract, up to termination, and profit on those costs.
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. Business Segments We operate in four business segments: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space.
We also will continue to evaluate our organizational structure and portfolio and will make strategic changes, acquisitions or divestitures, as appropriate, while deepening our connection to commercial industry through cooperative partnerships, joint ventures and equity investments. Business Segments We operate in four business segments: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space.
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.
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 resulted in certain parts’ shortages, extended lead times and pricing escalations affecting certain sources of supply. We are working with U.S.
Our Advanced Development Programs (ADP) organization, also known as Skunk Works ® , is focused on future systems, including unmanned and manned aerial systems and next generation capabilities for air dominance, hypersonics, intelligence, surveillance, reconnaissance, situational awareness and air mobility. We continue to explore technology advancement and insertion into our existing aircraft.
Our Advanced Development Programs (ADP) organization, also known as Skunk Works ® , is focused on future systems, including unmanned and manned aerial systems and next generation capabilities 3 Table of Contents for air dominance, hypersonics, intelligence, surveillance, reconnaissance, situational awareness and air mobility. We continue to explore technology advancement and insertion into our existing aircraft.
We invest substantially in our people to ensure that our workforce has the technical skills necessary to succeed, and we expect to continue to invest internally in innovative technologies that address rapidly evolving mission requirements for our customers.
We invest substantially in our people to ensure that our people have the technical skills necessary to succeed, and we expect to continue to invest internally in innovative technologies that address rapidly evolving mission requirements for our customers.
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.
Government for various classified programs. RMS’ major lines of business 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, and the Combat Rescue Helicopter (CRH) utilized by the U.S.
Government and cannot be specifically described. The operating results of classified contracts are included in our consolidated financial statements. The business risks and capital requirements associated with classified contracts historically have not differed materially from those of our other U.S. Government contracts.
The operating results of classified contracts are included in our consolidated financial statements. The business risks and capital requirements associated with classified contracts historically have not differed materially from those of our other U.S. Government contracts.
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.
Missiles and Fire Control MFC provides air and missile defense systems; tactical missiles and precision strike weapon systems; logistics; fire control systems; and mission operations support, readiness, engineering support and integration services. MFC also has contracts with the U.S. Government for various classified programs.
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.
As of December 31, 2025, we had a highly skilled workforce made up of approximately 123,000 employees, including approximately 72,000 engineers, scientists and information technology professionals. As of December 31, 2025, 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.
Our 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.
In 2025, it focused on continuing to accelerate the transformation of our workforce management technology 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.
Government, undersea combat systems programs largely serving the U.S. Navy, and Australia's Joint Air Battle Management System (AIR 6500). • Training and logistics solutions (TLS) programs such as those providing sustainment services and programs that provide simulators and associated training to U.S. military and foreign government customers.
Government, undersea combat systems programs largely serving the U.S. Navy, and Australia's Joint Air Battle Management System (AIR 6500). 4 Table of Contents • Training, logistics and simulation (TLS) programs such as those providing sustainment services and programs that provide simulators and associated training to U.S. military and foreign government customers.
We believe this employee development makes us more competitive and assists with leadership succession planning throughout the company.
We believe this employee development makes us more competitive and assists with leadership succession planning.
The Apache fire control system provides weapons-targeting capability for the Apache helicopter for the U.S. Army and international customers. SNIPER is a targeting system for several fixed-wing aircraft and is produced for the U.S. Air Force and international customers. IRST21 provides long-range infrared detection and tracking of airborne threats and is used on several fixed-wing aircraft.
SNIPER is a targeting system for several fixed-wing aircraft and is produced for the U.S. Air Force and international customers. IRST21 provides long-range infrared detection and tracking of airborne threats and is used on several fixed-wing aircraft. IRST21 is produced for the U.S. Air Force, 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.
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 River-Class Destroyer (RCD) (formerly known as Canadian Surface Combatant) programs to provide surface combatant ships for the U.S.
Government has the ability to unilaterally definitize contracts and has done so in the past. Absent a successful appeal of such action, the unilateral definitization of the contract obligates us to perform under terms and conditions imposed by the U.S. Government. The U.S.
Government has the ability to unilaterally definitize contracts and has done so in the past. Absent a successful appeal of such action, the unilateral definitization of the contract obligates us to perform under terms and conditions imposed by the U.S. Government. Classified Contracts A portion of our business is classified by the U.S. Government and cannot be specifically described.
However, under certain classified fixed-price development and production contracts, we are unable to insure risk of loss to government property because of the classified nature of the contracts and the inability to disclose classified information necessary for underwriting and claims to commercial insurers.
However, certain classified fixed-price development and production contracts carry higher performance risk, and we are unable to insure loss to government property because the classified nature of the contracts prevents the disclosure of information necessary for underwriting and claims to commercial insurers.
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.
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 and Tracking Layer programs, multiple tranches of small satellites to support the proliferated space architecture, with constellations of missile warning and communications satellites for the Space Development Agency.
IRST21 is produced for the U.S. Air Force, the U.S. Navy, the National Guard and international customers. • The Special Operations Forces Global Logistics Support Services (SOF GLSS) program, which provides logistics support services to the special operations forces of the U.S. military. • Hypersonics programs, which include several programs with the U.S. Air Force and U.S.
Navy, the National Guard and international customers. • The Special Operations Forces Global Logistics Support Services (SOF GLSS) program, which provides logistics support services to the special operations forces of the U.S. military. • Hypersonics programs, which include several programs with the U.S. Air Force and U.S. Army to design, develop and build hypersonic strike weapons.
For information regarding these matters, including current estimates of the amounts that we believe are required for remediation or cleanup to the extent that they are probable and 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.
Government. For information regarding these matters, including current estimates of the amounts that we believe are required for remediation or cleanup to the extent that they are probable and estimable, see “Note 14 – Legal Proceedings, Commitments and Contingencies” included in our Notes to Consolidated Financial Statements. See also the discussion of environmental matters in Item 1A – Risk Factors.
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.
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.
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.
The F-35 program is our largest program, generating 27% of our total consolidated sales, as well as 67% of Aeronautics’ sales in 2025. The F-35 program consists of multiple development, production and sustainment contracts. Development is focused on modernizing F-35’s capability and addressing emerging threats. Sustainment provides logistics and training support for the aircraft delivered to F-35 customers.
Various jurisdictions around the world in which we operate, including the U.S., the European Union, the United Kingdom, Australia and certain U.S. States, have adopted or proposed laws related to climate and sustainability reporting.
Climate and Sustainability Reporting and Regulation There is an increasing global regulatory focus on greenhouse gas (GHG) emissions and their potential impacts relating to climate change. Various jurisdictions around the world in which we operate, including the U.S., the European Union, the United Kingdom, Australia and certain U.S. States, have adopted or proposed laws related to climate and sustainability reporting.
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.
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.
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.
We rely on other companies to provide materials, components and products and to 5 Table of Contents perform a portion of the services that are provided to our customers under the terms of most of our contracts.
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.
Air Force. • 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.
Army to design, develop and build hypersonic strike weapons. • The Javelin program, which is a one-person portable and platform-employable anti-tank and multi-target precision weapon system. Javelin was developed and is currently produced for the U.S. Army and U.S. Marine Corps by a joint venture between Lockheed Martin and RTX Corporation.
Hellfire and JAGM are air-to-ground missile used on rotary and fixed-wing aircraft, which is produced for the U.S. Army, Navy, Marine Corps and international customers. • The Javelin program, which is a one-person portable and platform-employable anti-tank and multi-target precision weapon system. Javelin was developed and is currently produced for the U.S. Army and U.S.
Space is also responsible for various classified systems and services in support of vital national security systems. Space’s major programs include: • The Next Generation Overhead Persistent Infrared (Next Gen OPIR) system, which provides the U.S. Space Force with enhanced worldwide missile warning capabilities. • The Trident II D5 Fleet Ballistic Missile (FBM), a program with the U.S.
Space provides network-enabled situational awareness and integrates complex space and ground global systems to help our customers gather, analyze and securely distribute critical intelligence data. Space is also responsible for various classified systems and services in support of vital national security systems. Space’s major programs include: • The Trident II D5 Fleet Ballistic Missile (FBM), a program with the U.S.
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.
We achieve this by developing and investing in differentiating technologies, forging strategic partnerships, including with commercial companies, executing on our multi-year business transformation initiative, maintaining fiscal discipline, and continuing to cultivate the greatest aerospace and defense workforce talent and culture in the world.
Hellfire is an air-to-ground missile used on rotary and fixed-wing aircraft, which is produced for the U.S. Army, Navy, Marine Corps and international customers. • The Apache fire control system, Sniper Advanced Targeting Pod (SNIPER ® ) and Infrared Search and Track (IRST21 ® ) sensors and global sustainment programs.
Marine Corps by a joint venture between Lockheed Martin and RTX Corporation. • The Apache fire control system, Sniper Advanced Targeting Pod (SNIPER ® ) and Infrared Search and Track (IRST21 ® ) sensors and global sustainment programs. The Apache fire control system provides weapons-targeting capability for the Apache helicopter for the U.S. Army and international customers.
R&D costs include basic research, applied research, concept formulation studies, design, development, and related test activities.
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.
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.
Our current areas of focus include technology modernization, life-cycle cost containment, delivery schedule optimization, and aircraft readiness enhancements. For additional information on the F-35 program, see Item 1A - Risk Factors for a discussion of risks related to the F-35 program.
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.
Our four business areas – Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space – work as one company offering integrated solutions, at scale, across all warfighting domains. Our defense, space, intelligence, homeland security, information technology, and cybersecurity capabilities serve U.S. and international customers in defense, civil and commercial applications. Our principal customers are agencies of the U.S.
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.
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 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.
Our early career strategy, to include partnerships with universities and college internship roles, is an integral part of developing the full breadth of our talent pipelines, particularly in technical fields and critical skills areas. We seek to access the broadest possible pool of talent to enable us to meet our hiring needs.
Space Space is engaged in the research and design, development, engineering and production of satellites, space transportation systems, and strategic, advanced strike, and defensive systems. Space provides network-enabled situational awareness and integrates complex space and ground global systems to help our customers gather, analyze and securely distribute critical intelligence data.
SEMS and MIC2 will therefore incorporate an updated mix of existing program portfolios designed to accelerate mission‑focused solutions and enhance our customers’ experience. Space Space is engaged in the research and design, development, engineering and production of satellites, space transportation systems, and strategic, advanced strike, and defensive systems.
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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.
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ITEM 1. Business General We are a global aerospace and defense technology company that builds and sustains the solutions America and its allies need to deter conflict and advance national security and scientific exploration objectives.
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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.
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Government and allies. Recent regional conflicts have demonstrated the integral role Lockheed Martin products play in protecting people, and we are rapidly transforming our business to meet increased demand.
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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.
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We are expanding production capacity to continue delivering at scale, and we are harnessing leading-edge technologies like artificial intelligence and autonomy, open-architecture systems, and advanced networking to make defense forces more agile, adaptive and unpredictable.
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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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Our goal is to deliver overwhelming capability and value – quickly, at the needed quantities and with the greatest effectiveness – to enable overmatch and strengthen deterrence today and into the future.
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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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Aircraft production is expected to continue well into the future given the U.S. Government’s stated objective of procuring 2,456 aircraft for the U.S. Air Force, U.S. Marine Corps, and U.S. Navy.
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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).
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We also have commitments from seven international partner countries and 12 FMS customers, who collectively during the year indicated their intent to purchase 72 additional aircraft beyond their existing programs of record. The F-35 program is significant and complex, and we, our customers, and our and our customers’ suppliers continually review aircraft performance, schedule, cost and requirements.
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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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Effective January 2026, the IWSS and C6ISR lines of business within RMS were restructured and renamed Sensors, Effectors & Mission Systems (SEMS) and Mission Integrated Command and Control (MIC2). This includes realignment of various programs, such as Aegis and RCD moving from what was historically IWSS to MIC2, which more closely aligns with C6ISR.
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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.
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Navy for the only submarine-launched intercontinental ballistic missile currently in production in the U.S. • The Next Generation Overhead Persistent Infrared (Next Gen OPIR) system, which provides the U.S.
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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, specialty steel, carbon fiber and advanced microelectronics, such as semiconductors.
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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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Our human capital management strategy, which we refer to as our people strategy, tightly aligns to our business needs and technology strategy.
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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.
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We strive to hire, develop and retain the top talent in the industry. During 2025, we hired nearly 10,800 new employees into Lockheed Martin, nearly 1,500 of which were college hires. In addition to the 10,800, we created internship opportunities for an additional 2,000 students.
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See also the discussion of environmental matters in Item 1A – Risk Factors. Climate and Sustainability Reporting and Regulation There is an increasing global regulatory focus on greenhouse gas (GHG) emissions and their potential impacts relating to climate change.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Significant Contingencies, Uncertainties and Estimates, including Pension, Taxes, Environmental and Litigation Costs Pension funding requirements and costs are dependent on return on pension assets and other economic and actuarial assumptions which if changed may cause our future earnings and cash flow to fluctuate significantly and affect the affordability of our products and services.
Biggest changeWe have and expect to continue to recognize gains or losses attributable to adjustments of the investments’ fair value, including impairments up to and including the full value of the investment, which events are generally outside of our control such as the success or failure of the company and market volatility. 19 Table of Contents Risks Related to Significant Contingencies, Uncertainties and Estimates, including Pension, Taxes, Environmental and Litigation Costs Pension funding requirements and costs are dependent on return on pension assets and other economic and actuarial assumptions which, if changed, may cause our future earnings and cash flow to fluctuate significantly and affect the affordability of our products and services.
International sales are subject to numerous political and economic factors, including changes in foreign national priorities, foreign government budgets, global economic conditions, and fluctuations in foreign currency exchange rates, the possibility of trade sanctions and other government actions, regulatory requirements, significant competition, taxation, and other risks associated with doing business outside the U.S.
International sales are subject to numerous political and economic factors, including changes in foreign national priorities, foreign government budgets, global economic conditions, and fluctuations in foreign currency exchange rates, the possibility of trade sanctions and other government actions, regulatory requirements, and significant competition, taxation, and other risks associated with doing business outside the U.S.
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.
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 development and transfer of critical knowledge and skills, including leadership development and succession planning throughout our business.
To be successful, we must conduct due diligence to identify valuation issues and potential loss contingencies or underlying risks, some of which are difficult to discover or assess prior to consummation of an acquisition or investment; negotiate transaction terms; complete and close complex transactions; integrate acquired companies and employees; and realize anticipated operating synergies efficiently and effectively.
To be successful, we must conduct due diligence to identify valuation issues and potential loss contingencies or underlying risks, some of which are difficult to discover or assess prior to consummation of an acquisition or investment; negotiate transaction terms; complete and close complex transactions; integrate acquired companies and employees; and realize anticipated operating and other synergies efficiently and effectively.
We sometimes have disputes with our contracting parties, including disputes regarding the cost, quality and timeliness of work performed, workshares, customer concerns about the other party’s performance, issues related to lower-tier subcontractor performance, our failure to issue or extend task orders, or our hiring the personnel of a subcontractor, teammate or joint venture partner or vice versa.
We sometimes have disputes with our contracting parties, including regarding the cost, quality and timeliness of work performed, workshares, customer concerns about the contracting party’s performance, issues related to lower-tier subcontractor performance, our failure to issue or extend task orders, or our hiring the personnel of a subcontractor, teammate or joint venture partner or vice versa.
In contrast, DCS transactions represent sales directly to international customers and are subject to U.S. and foreign laws and regulations, including product testing, import-export control, technology transfer restrictions, investments, taxation, repatriation of earnings, exchange controls, the Foreign Corrupt Practices Act and other anti-corruption laws and regulations, and the anti-boycott provisions of the U.S. Export Control Reform Act of 2018.
In contrast, DCS transactions represent sales directly to international government customers and are subject to U.S. and foreign laws and regulations, including product testing, import-export control, technology transfer restrictions, investments, taxation, repatriation of earnings, exchange controls, the Foreign Corrupt Practices Act and other anti-corruption laws and regulations, and the anti-boycott provisions of the U.S. Export Control Reform Act of 2018.
These offset agreements generally extend over several years and obligate the contractor to perform certain commitments, which may include in-country purchases, technology transfers, local manufacturing support, consulting support to in-country projects, investments in joint ventures and financial support projects, and preference for local suppliers or subcontractors.
These agreements generally extend over several years and obligate the contractor to perform certain commitments, which may include in-country purchases, technology transfers, local manufacturing support, consulting support to in-country projects, investments in joint ventures and financial support projects, and preference for local suppliers or subcontractors.
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.
Interest rates also impact our pension obligations. For example, higher interest rates 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.
A failure by one or more of our contracting parties to provide the agreed-upon materials, components or products, or perform the agreed-upon services, on a timely basis, according to specifications, including compliance with regulatory requirements we flow down from our prime contracts, or at all, has and may adversely affect our ability to perform our obligations and require that we transition the work to other companies.
A failure by one or more of our contracting parties to provide agreed-upon materials, components or products, or perform agreed-upon services, on a timely basis, according to specifications, including compliance with regulatory requirements we flow down from our prime contracts, or at all, has and may adversely affect our ability to perform our obligations and require that we transition impacted work to other companies.
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.
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 U.S. defense industrial base and other critical infrastructure sectors.
Risks Related to Ownership of our Common Stock There can be no assurance that we will continue to increase our dividend or to repurchase shares of our common stock.
Risks Related to Ownership of our Common Stock There can be no assurance that we will continue to pay or increase our dividend or to repurchase shares of our common stock.
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.
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 technical data and software packages as well as the scope and applicability of the rights in such technical data and software once acquired.
Failure to fund or the termination of significant programs or contracts by the U.S. Government could adversely affect our business and financial performance. DoD’s changes in funding priorities also could reduce opportunities in existing programs and in future programs or initiatives where we intend to compete and where we have made investments.
Failure to fund or the termination of significant programs or contracts by the U.S. Government could adversely affect our business and financial performance. DoW’s changes in funding priorities also could reduce opportunities in existing programs and in future programs or initiatives where we intend to compete and where we have made investments.
The impact of these plans on our earnings may be volatile in that the amount of expense or income we record for our postretirement benefit plans may materially change from year to year because the calculations are sensitive to changes in several key economic assumptions, including interest rates and rates of return on plan assets, other actuarial assumptions, including participant longevity (also known as mortality), as well as the timing of cash funding.
The impact of these plans on our earnings may be volatile in that the amount of expense or income we record may materially change from year to year because the calculations are sensitive to changes in several key economic assumptions, including interest rates and rates of return on plan assets, other actuarial assumptions including participant longevity (also known as mortality), as well as the timing of cash funding.
Given the size and complexity of the F-35 program, we anticipate that there will be continual reviews related to aircraft performance, program and delivery schedule, cost, and requirements as part of the DoD, Congressional, and international countries’ oversight and budgeting processes.
Given the size and complexity of the F-35 program, we anticipate that there will be continual reviews related to aircraft performance, program and delivery schedule, cost, and requirements as part of the DoW, Congressional, and international countries’ oversight and budgeting processes.
Geopolitical, macroeconomic and public health events and conditions could adversely affect our business, financial condition and operating results. Geopolitical . Changes in U.S. government and other nations’ administration and their associated shifts in policy and priorities could also impact our operations and market conditions.
Geopolitical, macroeconomic and public health events and conditions could adversely affect our business, financial condition and operating results. Geopolitical . Changes in U.S. Government and other nations’ administrations and their associated shifts in policy and priorities could also impact our operations and market conditions.
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.
Government audits and investigations often take years to 13 Table of Contents 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.
While we would expect to compete and be well positioned as the incumbent on existing programs, we may not be successful and, even if we are successful, the replacement programs may be funded at lower levels or result in lower margins.
While we generally expect to compete and be well positioned as the incumbent on existing programs, we may not be successful and, even if we are successful, the replacement programs may be funded at lower levels or result in lower margins.
Certain contracts may impose other risks, such as forfeiting fees, paying penalties, or providing replacement systems in the event of performance failure. Contracts for development programs include complex design and technical requirements and are often contracted on a cost-reimbursable basis, however, some of our existing development programs are contracted on a fixed-price basis.
Certain contracts may impose other risks, such as temporary payment withholds, forfeiting fees, paying penalties, or providing replacement systems in the event of performance failure. Contracts for development programs include complex design and technical requirements and are often contracted on a cost-reimbursable basis, however, some of our existing development programs are contracted on a fixed-price basis.
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.
Such an impact could affect their performance and adversely impact our operations. 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.
The DoD’s efforts could affect our ability to protect and exploit our intellectual property and to leverage supplier intellectual property, for example, if we are unable to obtain necessary licenses from our suppliers to meet government requirements.
The DoW’s efforts could affect our ability to protect and exploit our intellectual property and to leverage supplier intellectual property, for example, if we are unable to obtain necessary licenses from our suppliers to meet government requirements.
While we have processes in place for management transition and the transfer of knowledge and skills, the loss of key personnel, coupled with an inability to adequately train other personnel, hire new personnel or transfer knowledge and skills, could significantly impact our ability to perform under our contracts and execute on new or growing programs.
While we have processes in place for management transition and the transfer of knowledge and skills, the loss of key personnel, coupled with an inability to adequately train other personnel, hire new personnel or transfer knowledge and skills, could significantly impact our ability to perform under our contracts, execute on new or growing programs and otherwise manage our business.
Government, international partners, or FMS customer countries to cut spending on this program or reduce or delay planned orders would have an adverse impact on our business and results of operations.
Government, international partners, or FMS customer countries to cut spending on this program or reduce or delay planned orders may have an adverse impact on our business and results of operations.
We are the prime contractor on most of our contracts and rely on other companies to provide materials, major 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.
We are the prime contractor on most of our contracts and rely on other companies to provide materials, major components and products, and to perform a portion of the services that are provided to our customers.
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.
The DoW is also implementing an overarching intellectual property acquisition policy that will require 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.
In addition, the timing and amount of share repurchases under Board of Directors approved share repurchase plans may differ from stated expectations and is within the discretion of management and will depend on many factors, including our ability to generate sufficient cash flows from operations in the future or to borrow money from available financing sources, our results of operations, capital requirements and applicable law.
In addition, the timing and amount of share repurchases under Board of Directors approved share repurchase plans may differ from stated expectations and is within the discretion of management and will depend on many factors, including our ability to generate sufficient cash flows from operations in the future or to borrow money from available financing sources, our results of operations, capital requirements, applicable law and the applicability of presidential executive orders.
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.
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.
We have incurred and will continue to incur liabilities for environmental remediation at some of our current and former facilities and at third-party-owned sites where we have been designated a potentially responsible party as a result of our historical activities and those of our predecessor companies.
We have incurred and will continue to incur liabilities for environmental remediation at some of our current and former facilities and at third-party-owned sites where we have been designated a potentially responsible party 21 Table of Contents as a result of our historical activities and those of our predecessor companies.
We are subject to extensive procurement laws and regulations, including those that enable the U.S. Government to terminate contracts for convenience. Our business and reputation could be adversely affected if we or those we do business with fail to comply with these laws and regulations.
We are subject to extensive procurement and other laws, regulations, and contract terms, including those that enable the U.S. Government to terminate contracts for convenience. Our business and reputation could be adversely affected if we or those we do business with fail to comply with these laws, regulations, or terms.
Sales of military products and services and any associated industrial development (offset) agreements are subject to U.S. export regulations and foreign policy, and there could be significant delays or other issues in reaching definitive agreements for announced programs.
Sales of military products and services and any associated industrial development (offset) agreements are subject to U.S. export regulations and foreign policy, and there could be significant delays or other issues in reaching definitive agreements for 16 Table of Contents announced programs.
We frequently team with international subcontractors and suppliers who also are exposed to similar risks. We believe DCS transactions present a higher level of potential risks because they involve direct commercial relationships with parties with which we typically have less familiarity.
We frequently team with international subcontractors and suppliers who also are exposed to similar risks. We believe DCS transactions present a higher level of potential risks because they involve direct relationships with governmental contracting parties with which we typically have less familiarity.
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.
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.
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 future occurrence of non-compliant components in our programs could cause 14 Table of Contents 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.
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.
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 bids could result in costly changes to our operations or affect our competitiveness on future bids, or our ability to bid at all.
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.
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.
The DoD is increasingly pursuing rapid acquisition pathways and procedures for new technologies, including through so called “other transaction authority” agreements (OTAs).
The DoW is increasingly pursuing rapid acquisition pathways and procedures for new technologies, including through so called “other transaction authority” agreements (OTAs).
These risks may cause us not to bid on certain future programs, which could adversely affect our future growth prospects and financial performance. See Note 1 – Organization and Significant Accounting Policies included in our Notes to Consolidated Financial Statements for further details about losses incurred on certain programs, including fixed-price development programs.
These risks may cause us not to bid on certain future programs, which could adversely affect our future growth prospects and financial performance. See “Note 1 – Organization and Significant Accounting Policies” included in our Notes to Consolidated Financial Statements for further details about losses incurred on certain programs, including fixed-price development programs.
See “Critical Accounting Policies” in the MD&A and Results of Operations and “Note 1 – Organization and Significant Accounting Policies” included in our Notes to Consolidated Financial Statements for a complete discussion of our significant accounting policies and use of estimates. Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results.
See “Critical Accounting Policies” in the MD&A and Results of Operations and “Note 1 – Organization and Significant Accounting Policies” included in our Notes to Consolidated Financial Statements for a complete discussion of our significant accounting policies and use of estimates. 20 Table of Contents Changes in tax laws and regulations and interpretations or exposure to additional tax liabilities could adversely affect our financial results.
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.
The improper conduct of our employees or others working on our behalf who have access to export controlled, classified or other sensitive information could also adversely affect our business and reputation.
Government representatives to limit the U.S. Government’s responsibility. Although the U.S. Government remains responsible for capital and operating costs associated with environmental compliance, responsibility for fines and penalties associated with environmental noncompliance typically is borne by either the U.S. Government or the contractor, depending on the contract and the relevant facts. Some environmental laws include criminal provisions.
Although the U.S. Government remains responsible for capital and operating costs associated with environmental compliance, responsibility for fines and penalties associated with environmental noncompliance typically is borne by either the U.S. Government or the contractor, depending on the contract and the relevant facts. Some environmental laws include criminal provisions.
In addition, costs to comply with new government regulations can increase our costs, reduce our margins and adversely affect our competitiveness. Also, a portion of our contracts are classified by the U.S. Government, which imposes security requirements that limit our ability to discuss our performance on these contracts, including any specific risks, disputes and claims. Contract Termination. The U.S.
In addition, costs to comply with new government regulations and changing policies and practices can increase our costs, reduce our margins and adversely affect our competitiveness. Also, a portion of our contracts are classified by the U.S. Government, which imposes security requirements that limit our ability to discuss our performance on these contracts, including any specific risks, disputes and claims.
These arrangements may involve subcontracts, teaming arrangements, joint ventures, or supply agreements with other companies on which we rely (contracting parties) and, in many cases, our contracting parties in turn rely on lower-tier subcontractors.
These arrangements may involve subcontracts, teaming arrangements, joint ventures, or supply agreements with other companies (contracting parties) and, in many cases, contracting parties in turn rely on lower-tier subcontractors.
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.
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 2025, 28% of our total sales were associated with international customers.
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.
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 or address other procurement policy preferences. U.S.
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.
However, if we are unable to increase production to meet demand in the timeframe customers expect, whether due to supply constraints, government funding, or otherwise, then we may lose sales opportunities as those customers seek alternatives, even less capable ones, that may be delivered more quickly.
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.
We have $11.3 billion of goodwill assets recorded on our consolidated balance sheet as of December 31, 2025 from previous acquisitions, which represents approximately 19% 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.
Our business may be adversely affected by the outcome of legal proceedings and other contingencies that cannot be predicted with certainty. As required by U.S.
We cannot predict the outcome of litigation and other contingencies with certainty. Our business may be adversely affected by the outcome of legal proceedings and other contingencies that cannot be predicted with certainty. As required by U.S.
Government-owned facilities on behalf of the U.S. Government. At such facilities, environmental compliance and remediation costs historically have been the responsibility of the U.S. Government. We have relied, and continue to rely with respect to past practices, on U.S. Government funding to pay at least a portion if not all of such costs, notwithstanding efforts by some U.S.
At such facilities, environmental compliance and remediation costs historically have been the responsibility of the U.S. Government. We have relied, and continue to rely with respect to past practices, on U.S. Government funding to pay at least a portion if not all of such costs, notwithstanding efforts by some U.S. Government representatives to limit the U.S. Government’s responsibility.
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.
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 terms, which may prevent or lessen the benefit of collaboration.
A reduction in overall U.S. defense spending, on an absolute or inflation-adjusted basis, because of shifting priorities, budget compromises or otherwise could adversely affect our business. Budget uncertainty, the potential for U.S. Government shutdowns, the use of continuing resolutions, and the federal debt ceiling can adversely affect our industry and the funding for our programs.
A reduction in overall U.S. defense spending, on an absolute or inflation-adjusted basis, because of shifting priorities, budget compromises or otherwise could adversely affect our business. Budget uncertainty, extended or repeated U.S. Government shutdowns, the use of continuing resolutions, and the federal debt ceiling can adversely affect our industry and both the quantum and timing of funding for our programs.
Our performance is dependent upon us identifying, attracting, developing, motivating and retaining a highly skilled workforce with the requisite skills in multiple areas including engineering, science, manufacturing, information technology, cybersecurity, business development and strategy and management.
Our business and financial performance depends on us identifying, attracting and retaining a highly skilled workforce. Our performance is dependent upon us identifying, attracting, developing, motivating and retaining a highly skilled workforce with the requisite skills in multiple areas including engineering, science, manufacturing, information technology, artificial intelligence, cybersecurity, business development and strategy and management.
Since the COVID-19 pandemic, we have implemented flexible work arrangements and a hybrid workforce model, where portions of our workforce work remotely while others are required to be on-site in our facilities depending on, among other things, the nature of the job performed, business needs, and evolving circumstances.
We have implemented flexible work arrangements and a distributed workforce model, where portions of our workforce work remotely while others are required to be on-site in our facilities depending on, among other things, the nature of the job performed, business needs, and evolving circumstances.
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.
If we are unable to successfully mitigate these impacts, our future profits, margins and cash flows, particularly for existing fixed-price contracts, may be adversely affected.
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.
The F-35 program, which consists of multiple development, production and sustainment contracts, is our largest program and represented 27% of our total consolidated sales in 2025. A decision by the U.S.
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.
If we fail in our development projects, if our new products or technologies fail to achieve customer acceptance, if competitors develop more capable technologies or offerings or develop new technologies or offerings or deliver existing offerings faster, or if stakeholders perceive our company as being slow to adapt, lacking in innovation or inconsistently delivering results, 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 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.
When appropriations are delayed or a government shutdown occurs and continues for an extended period, we may be at risk of reduced orders, program cancellations, nonpayment or payment delays and other disruptions. 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.
While we believe pension risk transfer transactions are beneficial, future transactions, depending on their size, could result in us making additional contributions to the pension trust and/or require us to recognize noncash settlement charges in earnings in the applicable reporting period.
Future transactions, depending on their size, could result in us making additional contributions to the pension trust and/or require us to recognize noncash settlement charges in earnings in the applicable reporting period.
For information regarding these matters, including current estimates of the amounts that we believe are required for environmental remediation to the extent probable and estimable, see “Critical Accounting Policies – Environmental Matters” in the MD&A and “Note 14 – Legal Proceedings, Commitments and Contingencies” included in our Notes to Consolidated Financial Statements. We manage and have managed various U.S.
For information regarding these matters, including current estimates of the amounts that we believe are required for environmental remediation to the extent probable and estimable, see “Note 14 – Legal Proceedings, Commitments and Contingencies” included in our Notes to Consolidated Financial Statements. We manage and have managed various U.S. Government-owned facilities on behalf of the U.S. Government.
We also may not be successful in making hardware upgrades and other modernization capabilities in a timely manner, including as a result of dependencies on suppliers, which could increase costs and create schedule delays.
We may face similar risks for other complex and technologically advanced programs. We also may not be successful in making hardware upgrades and other modernization capabilities in a timely manner, including as a result of dependencies on suppliers, which could increase costs and create schedule delays.
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.
U.S. and international regulatory scrutiny of mergers and acquisitions has and 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.
In recent years, we have taken actions intended to mitigate the risk related to our defined benefit pension plans including pension risk transfer transactions whereby we purchase group annuity contracts (GACs) from insurance companies using assets from the pension trust. We expect to continue to evaluate such transactions in the future.
In recent years, we have taken actions intended to reduce the size of our defined benefit pension plans including pension transactions whereby we purchase group annuity contracts (GACs) from insurance companies using assets from the pension trust and transfer associated pension liabilities to the insurers. We expect to continue to evaluate such transactions in the future.
Additionally, if competitors can offer lower cost services and products, or provide services or products more quickly, at equivalent or in some cases even reduced capabilities, we may lose new business opportunities or contract recompetes, which could adversely affect our future results.
Additionally, if competitors can offer lower cost services and products, or provide services or products more quickly, at equivalent or in some cases even reduced capabilities, we may lose new business opportunities or contract recompetes, which could adversely affect our future results. We are facing increased competition from new entrants, startups and non-traditional defense contractors.
Changes in U.S. (federal or state) or foreign tax laws and regulations, or their interpretation and application, including those with retroactive effect, could result in increases in our tax expense and affect profitability and cash flows.
We are subject to income and other taxes in the U.S. and foreign jurisdictions. Changes in U.S. (federal or state) or foreign tax laws and regulations, or their interpretation and application, including those with retroactive effect, could result in increases in our tax expense and affect profitability and cash flows.
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.
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.
If a contract is terminated for convenience, we generally are protected by provisions covering reimbursement for costs incurred on the contract and profit on those costs. However, to the extent insufficient funds have been appropriated by the U.S. Government to cover our costs upon a termination for convenience, the U.S.
Generally, prime contractors have similar termination rights under subcontracts related to government contracts. If a contract is terminated for convenience, we generally are protected by provisions covering reimbursement for costs incurred on the contract and profit on those costs. However, to the extent insufficient funds have been appropriated by 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.
Government, including the exercise of foreign policy, Congressional oversight or the financing of particular programs, that may alter the international demand for our products or 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.
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.
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.
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.
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 financial stability and viability of our contracting parties or lower-tier subcontractors have and in the future could adversely affect their ability to meet their performance obligation.
The financial stability and viability of our contracting parties or lower-tier subcontractors have and in the future could adversely affect their ability to meet their performance obligations and result in an impact on our business and results of operations.
When operating under a undefinitized contract action (UCA), which is when we begin performing our obligations before the terms, specifications or price are finally agreed to between the parties, the U.S.
From time to time, we perform work under a UCA with the U.S. Government, which is when we begin performing our obligations before the terms, specifications or price are finally agreed to between the parties. 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.
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.
Additionally, third parties may assert that our products or services infringe their intellectual property rights, which could result in costly and time-consuming disputes, subject us to damages and injunctions and adversely affect our ability to compete and perform on certain contracts. Our business and financial performance depends on us identifying, attracting and retaining a highly skilled workforce.
Additionally, third parties may assert 17 Table of Contents that our products or services infringe their intellectual property rights, which could result in costly and time-consuming disputes, subject us to damages and injunctions and adversely affect our ability to compete and perform on certain contracts.
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.
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.
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.
We monitor developments in climate change-related laws, regulations and policies for their potential effect on us. 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.
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. Competition and changing customer procurement policies could adversely affect our business and financial results.
The amount of net deferred tax assets will change periodically based on several factors, including the measurement of our postretirement benefit plan obligations, actual cash contributions to our postretirement benefit plans, change in the amount or reevaluation of uncertain tax positions, and future changes in tax laws.
The amount of net deferred tax assets will change periodically based on several factors, including the measurement of our retirement benefit obligations, cash contributions to our retirement plans, change in the amount or reevaluation of uncertain tax positions, and future changes in tax laws. In addition, we are regularly under audit or examination by tax authorities, including foreign tax authorities.
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.
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.
ITEM 1A. Risk Factors An investment in our common stock or debt securities involves risks and uncertainties. While we seek to identify, manage and mitigate risks to our business, risk and uncertainty cannot be eliminated or necessarily predicted.
ITEM 1A. Risk Factors An investment in our common stock or debt securities involves risks and uncertainties. While we seek to identify, manage and mitigate risks to our business, risk and uncertainty cannot be eliminated or necessarily predicted. The outcome of one or more of these risks could have a material effect on our results of operations or financial position.
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.
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. Government functions as an intermediary in FMS sales, we are reliant on, and could be adversely impacted by, relations between the U.S.
Furthermore, the level of continuing demand and our ability to sell to customers to meet that demand is subject in part to changes in government policies and priorities. Economic sanctions, export controls, and other trade restrictions, for instance those that the U.S.
Furthermore, the level of continuing demand and our ability to sell to customers to meet that demand is subject in part to changes in government policies and priorities.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

9 edited+0 added−1 removed17 unchanged
Biggest changeAs 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.
Biggest changeWe also have a corporate-wide counterintelligence and insider threat detection program to proactively identify external and internal threats and mitigate those threats in a timely manner. As a defense contractor, we must comply with extensive regulations, including requirements imposed by the DFARS related to adequately safeguarding controlled unclassified information (CUI) and reporting cybersecurity incidents to the DoW.
For example, we have worked in collaboration with the other members of the defense industrial base to support DoD’s development of the Cybersecurity Maturity Model Certification (CMMC) program, DoD’s program to ensure members of the defense industrial base meet cybersecurity requirements for handling CUI and federal contract information.
For example, we have worked in collaboration with the other members of the defense industrial base to support DoW’s development of the Cybersecurity Maturity Model Certification (CMMC) program, DoW’s program to ensure members of the defense industrial base meet cybersecurity requirements for handling CUI and federal contract information.
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.
We also make available cybersecurity education and awareness materials and briefings to our suppliers. 23 Table of Contents 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.
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.
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.
Senior leadership, including our Chief Information Security Officer (CISO), regularly briefs the Board of Directors on our cybersecurity and information security posture and the Board of Directors is apprised of cybersecurity incidents deemed to have a moderate or higher business impact, even if immaterial to us.
Senior leadership, including our Chief Information Security Officer (CISO), report to the Board of Directors on our cybersecurity and information security posture at least annually and the Board of Directors is apprised of cybersecurity incidents deemed to have a moderate or higher business impact, even if immaterial to us.
For example, we use a proactive risk management strategy that we developed and implemented called the Intelligence Driven Defense ® model that seeks to identify and prevent cybersecurity incidents by understanding the nature of adversaries and using this information to minimize the impact of an attack. Third parties also play a role in our cybersecurity.
For example, we use a proactive risk management strategy that we developed and implemented called the Intelligence Driven Defense ® model that seeks to identify and prevent cybersecurity incidents by understanding the nature of adversaries and using this information to minimize the impact of an attack.
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 have implemented cybersecurity policies and frameworks based on industry and governmental standards to align closely with DoW requirements, instructions and guidance. Moreover, we continue to work with the DoW on assessing cybersecurity risk and on policies and practices aimed at mitigating these 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.
In November 2025, we submitted our initial CMMC certification as required by the program. In addition to following DoW 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 engage third-party services to conduct evaluations of our security controls, whether through penetration testing, independent audits or consulting on best practices to address new challenges. These evaluations include testing both the design and operational effectiveness of security controls.
The effectiveness of our security controls are validated by external third parties, including an independent audit agency to maintain our ISO 27001 certification. Whether through independent audits or consulting on best practices, we continuously evaluate both the design and operational effectiveness of security controls.
Removed
We also have a corporate-wide counterintelligence and insider threat detection program to proactively identify external and internal threats and mitigate those threats in a timely manner.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−1 removed1 unchanged
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.
Biggest changeLaurel, New Jersey; Owego and Syracuse, New York; Manassas, Virginia; and Mielec, Poland. • Space - Huntsville, Alabama; Sunnyvale, California; Denver, Colorado; Cape Canaveral, Florida; and Valley Forge, Pennsylvania. • Corporate activities - Bethesda, Maryland. 24 Table of Contents The following is a summary of our square feet of floor space owned, leased, or utilized by business segment at December 31, 2025 (in millions): Owned Leased Government- Owned Total Aeronautics 5.1 2.8 14.7 22.6 Missiles and Fire Control 7.8 2.4 2.0 12.2 Rotary and Mission Systems 10.5 4.7 0.2 15.4 Space 9.5 3.3 0.1 12.9 Corporate activities 2.5 0.9 — 3.4 Total 35.4 14.1 17.0 66.5 We believe our facilities are in good condition and adequate for their current use.
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.
At December 31, 2025, we had significant operations in the following locations: • Aeronautics - Palmdale, California; Marietta, Georgia; Greenville, South Carolina; and Fort Worth, Texas. • Missiles and Fire Control - Troy, Alabama; 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, 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 2. Properties At December 31, 2025, we owned or leased building space (including offices, manufacturing plants, warehouses, service centers, laboratories and other facilities) at 333 locations primarily in the U.S. Additionally, we manage or occupy 9 government-owned facilities under lease and other arrangements.
Removed
Laurel, New Jersey; Owego and Syracuse, New York; Manassas, Virginia; and Mielec, Poland. • Space - Huntsville, Alabama; Sunnyvale, California; Denver, Colorado; Cape Canaveral, Florida; and Valley Forge, Pennsylvania. • Corporate activities - Bethesda, Maryland.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed5 unchanged
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.
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 “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

11 edited+1 added−2 removed1 unchanged
Biggest changePrior 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.
Biggest changeHe previously served as Vice President and Chief Financial Officer of the Missiles and Fire Control (MFC) business segment from January 2024 to April 2025. Prior to that, Mr. Scott was Vice President and Treasurer from June 2022 through December 2023, and Vice President, Finance and Business Operations of the Space business segment from March 2019 to August 2021.
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.
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 50), Vice President, Treasurer and Investor Relations Ms. Ricciardone has served as Vice President, Treasurer and Investor Relations since January 2024.
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.
ITEM 4. Mine Safety Disclosures Not applicable. Information about our Executive Officers Our executive officers as of January 29, 2026 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. There are no family relationships among any of our executive officers and directors.
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
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
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.
O’Connor has served as Senior Vice President, General Counsel and Corporate Secretary since January 2025. 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. H. Edward Paul, III (age 50), Vice President and Controller 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.
Frank A. St. John (age 59), Chief Operating Officer Mr. St. John has served as Chief Operating Officer since June 2020. He previously served as Executive Vice President for RMS from August 2019 to June 2020. James D. Taiclet (age 65), Chairman, President and Chief Executive Officer Mr.
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.
Prior to that, she served as Treasurer and Vice President, Strategy and Investor Relations for Hubbell Incorporated from January 2016 to June 2019. Evan T. Scott (age 48), Chief Financial Officer Mr. Scott has served as Chief Financial Officer since April 2025.
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.
Taiclet has served as Chairman since March 2021 and as President and Chief Executive Officer (CEO) of Lockheed Martin Corporation since June 2020. He has served on the Lockheed Martin Corporation Board of Directors since January 2018. Gregory M. Ulmer (age 61), President – Aeronautics Mr. Ulmer has served as President for the Aeronautics business segment since February 2021.
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.
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. Robert M. Lightfoot, Jr. (age 62), President – Space Mr. Lightfoot has served as President for the Space business segment since January 2022.
Cahill (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.
Cahill previously served as Senior Vice President 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. Stephanie C. Hill (age 61), President – Rotary and Mission Systems Ms.
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.
He previously served as Vice President, Operations for the Space business segment from June 2021 to December 2021. Prior to that, he served as Vice President, Strategy and Business Development for Space from May 2019 to June 2021. 25 Table of Contents Kevin J. O’Connor (age 58), Senior Vice President, General Counsel and Corporate Secretary Mr.
Removed
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.
Added
All executive officers serve at the discretion of the Board of Directors. Timothy S. Cahill (age 60), President – Missiles and Fire Control Mr. Cahill has served as President for the Missiles and Fire Control (MFC) business segment since November 2022. Mr.
Removed
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.

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 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.
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 29, 2025 – October 26, 2025 (c) 82,681 $ 488.29 81,913 $ 9,033 October 27, 2025 – November 30, 2025 (c) 62,123 $ 488.43 61,415 $ 9,003 December 1, 2025 – December 31, 2025 (c) 1,441,683 $ 474.26 1,432,865 $ 8,324 Total (c) 1,586,487 $ 475.55 1,576,193 (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, 2024.
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, 2025.
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 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, 2025.
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.
Stockholder Return Performance Graph The following graph compares the total return on a cumulative basis through December 31, 2025, assuming reinvestment of dividends, of $100 invested in Lockheed Martin common stock as of market close on December 31, 2020 to the Standard and Poor’s (S&P) 500 Index and the S&P Aerospace & Defense Index.
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.
In October 2025, the Board of Directors authorized an increase to the program by $2.0 billion. The total remaining authorization for future common share repurchases under our share repurchase program was $8.3 billion as of December 31, 2025.
Under the program, management has discretion to determine the dollar amount of shares to be repurchased and the timing of any repurchases in compliance with applicable law and regulation. This includes purchases pursuant to Rule 10b5-1 plans, including accelerated share repurchases. The program does not have an expiration date.
Under the program, management has discretion to determine the dollar amount of shares to be repurchased and the timing of any repurchases in compliance with applicable law and regulation. This includes purchases pursuant to Rule 10b5-1 plans, including accelerated share repurchases.
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.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities At January 26, 2026, we had 20,822 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.
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.
As a result, our fiscal months often differ from the calendar months. For example, September 29, 2025 was the first day of our October 2025 fiscal month.
(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.
The program does not have an expiration date, and may be amended or terminated by the Board of Directors at any time. (c) During the fourth quarter of 2025, the total number of shares purchased included 10,294 shares that were transferred to us by employees in satisfaction of tax withholding obligations associated with the vesting of restricted stock units.

Item 7. Management's Discussion & Analysis

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

160 edited+63 added−104 removed70 unchanged
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.
Biggest changeSales, operating costs and expenses and operating profit for each of our business segments were as follows (in millions): 2025 2024 2023 Sales Aeronautics $ 30,257 $ 28,618 $ 27,474 Missiles and Fire Control 14,450 12,682 11,253 Rotary and Mission Systems 17,312 17,264 16,239 Space 13,029 12,479 12,605 Total sales $ 75,048 $ 71,043 $ 67,571 Operating profit Aeronautics $ 2,086 $ 2,523 $ 2,825 Missiles and Fire Control 1,989 413 1,541 Rotary and Mission Systems 1,323 1,921 1,865 Space 1,345 1,226 1,158 Total business segment operating profit 6,743 6,083 7,389 Unallocated items FAS/CAS pension operating adjustment 1,518 1,624 1,660 Intangible asset amortization expense (254) (247) (247) Impairment and other charges (66) (87) (92) Other, net (210) (360) (203) Total unallocated, net 988 930 1,118 Total consolidated operating profit $ 7,731 $ 7,013 $ 8,507 The following segment discussions include information relating to backlog for each segment.
At the outset of a contract accounted for under the percentage-of-completion cost-to-cost method, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract and assess the effects of those risks on our estimates of sales and total costs to complete the contract, as well as our ability to earn variable consideration.
At the outset of a contract accounted for under the percentage-of-completion cost-to-cost method, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract, as well as our ability to earn variable consideration, and assess the effects of those risks on our estimates of sales and total costs to complete the contract.
The impact in 2024 includes losses of $555 million recognized on a classified program at our Aeronautics business segment, reach-forward losses of $1.4 billion recognized on a classified program at our MFC business segment and $155 million of favorable profit rate adjustments following the resolution of a long-standing claim associated with a completed C-5 Galaxy aircraft contract.
The impact in 2024 includes reach-forward losses of $555 million on a classified program at our Aeronautics business segment, reach-forward losses of $1.4 billion recognized on a classified program at our MFC business segment and $155 million of favorable profit rate adjustments following the resolution of a long-standing claim associated with a completed C-5 Galaxy aircraft contract at our Aeronautics business segment.
We have active development, production and sustainment support of the S-70 Black Hawk and MH-60 Seahawk helicopters to international customers, including India, Philippines, Australia, the Republic of Korea, Thailand, the Kingdom of Saudi Arabia and Greece. Commercial aircraft are sold to international customers to support search and rescue missions as well as VIP and offshore oil and gas transportation.
We have active development, production and sustainment support of the S-70 Black Hawk and MH-60 Seahawk helicopters to international customers, including India, Philippines, Australia, the Republic of Korea, Thailand, the Kingdom of Saudi Arabia, Japan, and Greece. Commercial aircraft are sold to international customers to support search and rescue missions as well as VIP and offshore oil and gas transportation.
This approach is consistent throughout the life cycle of our contracts, as management assesses the bidding of each contract by focusing on net sales and operating profit and monitors performance on our contracts in a similar manner through their completion. We regularly provide customers with reports of our costs as the contract progresses.
This approach is consistent throughout the life cycle of our contracts, as management assesses the bidding of each contract by focusing on sales and operating profit and monitors performance on our contracts in a similar manner through their completion. We regularly provide customers with reports of our costs as the contract progresses.
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.
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 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.
Contract Accounting / Sales Recognition The majority of our net sales are generated from long-term contracts with the U.S. Government and international customers (including FMS contracted through the U.S. Government) for the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.
Contract Accounting / Sales Recognition The majority of our sales are generated from long-term contracts with the U.S. Government and international customers (including FMS contracted through the U.S. Government) for the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.
Changes in net sales and operating profit generally are expressed in terms of volume, contract mix, and/or performance (referred to as profit booking rate adjustments). Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts.
Changes in sales and operating profit generally are expressed in terms of volume, contract mix, and/or performance (referred to as profit booking rate adjustments). Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts.
Under the percentage-of-completion cost-to-cost method, we record net sales on contracts over time based upon our progress towards completion on a particular contract, as well as our estimate of the profit to be earned at completion.
Under the percentage-of-completion cost-to-cost method, we record sales on contracts over time based upon our progress towards completion on a particular contract, as well as our estimate of the profit to be earned at completion.
In addition, we may enter into advance agreements with the U.S. Government that address the subjects of allowability and allocability of costs to contracts for specific matters.
In addition, we may enter into agreements with the U.S. Government that address the subjects of allowability and allocability of costs to contracts for specific matters.
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.
At December 31, 2025 and 2024, 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.
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.
All of our qualified defined benefit pension plans had an ERISA funded status of at least 80% as of both December 31, 2025 and 2024. 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 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
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 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.
The cash flows employed in the DCF analysis are based on our best estimate of future sales, earnings and cash flows after considering factors such as general market conditions, U.S. Government budgets, existing firm orders, expected future orders, contracts with suppliers, labor agreements, changes in 50 Table of Contents working capital, long term business plans and recent operating performance.
The cash flows employed in the DCF analysis are based on our best estimate of future sales, earnings and cash flows after considering factors such as general market conditions, U.S. Government budgets, existing firm orders, expected future orders, contracts with suppliers, labor agreements, changes in working capital, long term business plans and recent operating performance.
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.
The amounts above in the table represent the portion of expected capital expenditures to be incurred in 2026 and beyond that have been obligated under contracts as of December 31, 2025 and not necessarily total capital expenditures for future periods.
We also may enter into long-term supply contracts for certain materials or components to coincide with the production schedule of certain products and to ensure their availability at known unit prices. We have a number of programs that are designated as classified by the U.S. Government, and that cannot be specifically described.
We also may enter into long-term supply contracts for certain materials or components to coincide with the production schedule of certain products and to ensure their availability at known unit prices. 36 Table of Contents We have a number of programs that are designated as classified by the U.S. Government, and that cannot be specifically described.
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).
The estimates consider the technical requirements (e.g., a newly developed product versus a mature product), the schedule and associated tasks (e.g., the number and type of milestone events) and costs (e.g., material, labor, subcontractor, overhead and the estimated costs to fulfill our industrial cooperation agreements, sometimes referred to as offset or localization agreements, required under certain contracts with international customers).
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.
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 FAS pension (expense) income), stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, intangible asset amortization expense and other corporate costs.
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.
Offset programs usually extend over several years and may provide for penalties, estimated at approximately $2.2 billion at December 31, 2025, 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.
Based on that qualitative evaluation, if we determine it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary. Otherwise, we perform a quantitative impairment test. We perform quantitative tests for most reporting units at least once every three years.
Based on that qualitative evaluation, if we determine it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary. 47 Table of Contents Otherwise, we perform a quantitative impairment test. We perform quantitative tests for most reporting units at least once every three years.
MFC’s major programs include PAC‑3, Terminal High Altitude Area Defense (THAAD), Multiple Launch Rocket System (MLRS), Precision Strike Missile (PrSM), Joint Air-to-Surface Standoff Missile (JASSM), Long-Range Anti-Ship Missile (LRASM), Hellfire, Apache fire control system, Sniper Advanced Targeting Pod (SNIPER ® ), Infrared Search and Track (IRST21 ® ), Special Operations Forces Global Logistics Support Services (SOF GLSS), hypersonics programs and Javelin.
MFC’s major programs include Patriot Advanced Capability-3 (PAC-3), Terminal High Altitude Area Defense (THAAD), Multiple Launch Rocket System (MLRS), Precision Strike Missile (PrSM), Joint Air-to-Surface Standoff Missile (JASSM), Long-Range Anti-Ship Missile (LRASM), Hellfire, Joint Air-to-Ground Missile (JAGM), Javelin, Apache fire control system, Sniper Advanced Targeting Pod (SNIPER ® ), Infrared Search and Track (IRST21 ® ), Special Operations Forces Global Logistics Support Services (SOF GLSS), and hypersonics programs.
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.
To the extent we have entered into purchase or other obligations at December 31, 2025 that also satisfy offset agreements, those amounts are included in the contractual commitments table above.
Our ability to recover investments on our consolidated balance sheet that we make to satisfy offset obligations is generally dependent upon the successful operation of 45 Table of Contents ventures that we do not control and may involve products and services that are dissimilar to our business activities.
Our ability to recover investments on our consolidated balance sheet that we make to satisfy offset obligations is generally dependent upon the successful operation of ventures that we do not control and may involve products and services that are dissimilar to our business activities.
In addition to future changes in tax laws, the amount of net deferred tax assets will change periodically based on several factors, including the measurement of our postretirement benefit plan obligations, actual cash contributions to our postretirement benefit plans and the change in the amount or reevaluation of uncertain tax positions.
In addition to future changes in tax laws, the amount of net deferred tax assets will change periodically based on several factors, including the measurement of our retirement benefit obligations, actual cash contributions to our retirement benefit plans and the change in the amount or reevaluation of uncertain tax positions.
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.
Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 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, 2024 filed with the SEC on January 28, 2025.
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.
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 DCS customers. The majority of our capital expenditures for 2025 and those planned for 2026 are for equipment, facilities infrastructure and information technology.
All of the estimates require significant judgement and are subject to change during the performance of the contract and may affect the profit booking rate.
All of the estimates require significant judgment and are subject to change during the performance of the contract and may affect the profit booking rate.
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.
We recovered $1.6 billion in 2025 and $1.7 billion in 2024 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 $1.9 billion and $2.2 billion at December 31, 2025 and 2024.
We invest substantially in our people to ensure that our workforce has the technical skills necessary to succeed, and we expect to continue to invest internally in innovative technologies that address rapidly evolving mission requirements for our customers.
We invest substantially in our people to ensure that our people have the technical skills necessary to succeed, and we expect to continue to invest internally in innovative technologies that address rapidly evolving mission requirements for our customers.
Cost of Sales Cost of sales, for both products and services, consist of materials, labor, subcontracting costs and an allocation of indirect costs (overhead and general and administrative), as well as the costs to fulfill our industrial cooperation agreements, sometimes referred to as offset agreements, required under certain contracts with international customers.
Operating Costs and Expenses Operating costs and expenses, for both products and services, consist of materials, labor, subcontracting costs and an allocation of indirect costs (overhead and general and administrative), as well as the costs to fulfill our industrial cooperation agreements, sometimes referred to as offset agreements, required under certain contracts with international customers.
We estimate profit as the difference between estimated revenues and total estimated costs to complete the contract. We also estimate variable 46 Table of Contents consideration at the most likely amount, which is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur.
We estimate profit as the difference between estimated sales and total estimated costs to complete the contract. We also estimate variable consideration at the most likely amount, which is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur.
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.
At December 31, 2025, the notional value of remaining obligations under our outstanding offset agreements totaled approximately $19.9 billion, which primarily relate to our Aeronautics, MFC and RMS business segments, most of which extend through 2044.
We evaluate several data points in order to arrive at an appropriate single weighted average discount rate, including results from cash flow models, quoted rates from long-term bond indices and changes in long-term bond rates over the past year.
We evaluate several data points in order to arrive at an appropriate discount rate assumption, including results from cash flow models, quoted rates from long-term bond indices and changes in long-term bond rates over the past year.
If any of our contracts with firm orders were to be terminated, our backlog would be reduced by the expected value of the unfilled orders of such contracts. Funded backlog was $107.8 billion at December 31, 2024, as compared to $107.4 billion at December 31, 2023. For backlog related to each of our business segments, see below.
If any of our contracts with firm orders were to be terminated, our backlog would be reduced by the expected value of the unfilled orders of such contracts. Funded backlog was $120.2 billion at December 31, 2025, as compared to $107.8 billion at December 31, 2024. For backlog related to each of our business segments, see below.
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.
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 $75.5 billion 43 Table of Contents related to contractual commitments entered into as a result of contracts we have with our U.S. Government customers. The U.S.
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.
We also will continue to evaluate our organizational structure and portfolio and will make strategic changes, 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.
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.
If the 6.50% expected long-term rate of return on plan assets assumption at December 31, 2025 that was used to compute the expected 2026 FAS pension expense had been 25 basis points higher or lower, with all other assumptions held constant, the amount of FAS pension expense projected for 2026 would be lower or higher by approximately $55 million.
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.
Our total outstanding short-term and long-term debt, net of unamortized discounts and issuance costs, was $21.7 billion as of December 31, 2025 and is in the form of publicly issued notes that bear interest at fixed rates. As of December 31, 2025, we were in compliance with all covenants contained in our debt and credit agreements.
We have ongoing combat systems programs associated with different classes of surface combatant ships for customers in Canada, Chile and New Zealand. Our Multi-Mission Surface Combatant (MMSC) program will provide surface combatant ships for international customers, such as the Kingdom of Saudi Arabia, designed to operate in shallow waters and the open ocean.
We have combat systems programs associated with different classes of surface combatant ships from customers in Canada and Germany. Our Multi-Mission Surface Combatant (MMSC) program will provide surface combatant ships for international customers, such as the Kingdom of Saudi Arabia, designed to operate in shallow waters and the open ocean.
Accordingly, such amounts are included in the discussion of our business segment results of operations. Net Sales We generate sales from the delivery of products and services to our customers.
Accordingly, such amounts are included in the discussion of our business segment results of operations. 32 Table of Contents Sales We generate sales from the delivery of products and services to our customers.
(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.
(federal or state) or foreign tax laws and regulations, or their interpretation and application (including those with retroactive effect), could significantly impact our provision for income taxes, the amount of taxes payable, our deferred tax asset and liability balances, and stockholders’ equity.
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.
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 2025, international customers accounted for 29% of MFC’s sales.
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.
For additional information about obligations and our future minimum contribution requirements for these plans, see “Note 11 – Retirement Benefits” 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, 2025.
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.
Government contracts, including FMS, and are recognized in our operating costs and expenses and 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 can occur in different periods from when pension contributions are made.
Capital Structure, Resources and Other At December 31, 2024, we held cash and cash equivalents of $2.5 billion that were generally available to fund ordinary business operations without significant legal, regulatory, or other restrictions.
Capital Structure, Resources and Other At December 31, 2025, we held cash and cash equivalents of $4.1 billion that were generally available to fund ordinary business operations without significant legal, regulatory, or other restrictions.
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.
A change of plus or minus 25 basis points in the 5.375% discount rate assumption at December 31, 2025, with all other assumptions held constant, would have decreased or increased the amount of the benefit obligation we recorded at the end of 2025 by approximately $700 million, which would result in an after-tax increase or decrease in stockholders’ equity at the end of the year of approximately $550 million.
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.
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. 35 Table of Contents Business Segment Results of Operations We operate in four business segments: Aeronautics, MFC, RMS and Space.
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.
Backlog At December 31, 2025, our backlog was $193.6 billion compared to $176.0 billion at December 31, 2024. Backlog is converted into sales in future periods as work is performed or deliveries are made.
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.
If the 5.375% discount rate at December 31, 2025 that was used to compute the expected 2026 FAS pension expense had been 25 basis points higher or lower, with all other assumptions held constant, the amount of FAS pension expense projected for 2026 would be lower or higher by approximately $10 million.
There continues to be strong international interest in the F-35 program, which includes commitments from the U.S. Government and seven international partner countries and twelve FMS customers, as well as expressions of interest from other countries. The U.S. Government and the partner countries continue to work together on the design, testing, production and sustainment of the F-35 program.
Government and seven international partner countries and twelve FMS customers, as well as expressions of interest from other countries. The U.S. Government and the partner countries continue to work together on the design, testing, production and sustainment of the F-35 program.
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.
We continue to use a single weighted average discount rate approach when calculating our consolidated pension benefit obligations resulting in 5.375% at December 31, 2025, compared to 5.625% at December 31, 2024.
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.
Our goal has been to fund each of our 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 2024 compared to 2023 primarily due to higher orders on PAC-3, JASSM and GMLRS programs.
Backlog Backlog increased in 2025 compared to 2024 primarily due to higher orders on JASSM, LRASM, PAC-3 and Apache programs.
We expect to recognize approximately 35% 32 Table of Contents of our backlog over the next 12 months and approximately 60% over the next 24 months as revenue, with the remainder recognized thereafter.
We expect to recognize approximately 37% of our backlog over the next 12 months and a total of approximately 60% over the next 24 months as revenue, with the remainder recognized thereafter.
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.
RMS’ major programs include Aegis Combat System, Littoral Combat Ship (LCS), Multi-Mission Surface Combatant (MMSC), River-Class Destroyer (RCD) (formerly known as Canadian Surface Combatant), Black Hawk and Seahawk helicopters, CH-53K King Stallion heavy lift helicopter, 39 Table of Contents Combat Rescue Helicopter (CRH), VH-92A helicopter, and the C2BMC program.
We will continue to evaluate the use of accelerated payments on an as needed basis. We seek to maintain a disciplined and dynamic cash deployment strategy to invest in our business and key technologies to provide our customers with enhanced capabilities, enhance stockholder value, and position ourselves to take advantage of new business opportunities when they arise.
We seek to maintain a disciplined and dynamic cash deployment strategy to invest in our business and key technologies to provide our customers with enhanced capabilities, enhance stockholder value, and position ourselves to take advantage of new business opportunities when they arise.
We remain committed to our ongoing efforts to increase the efficiency of our operations and improve the cost competitiveness and affordability of our products and services, which may, in part, offset cost increases from inflation. International Business A key component of our strategic plan is to grow our international sales.
We remain committed to our ongoing efforts to increase the efficiency of our operations and improve the cost competitiveness and affordability of our products and services, which may, in part, offset cost increases from inflation.
Our consolidated cost of sales was as follows (in millions): 2024 2023 2022 Cost of sales – products $ (54,852) $ (50,206) $ (49,357) % of product sales 92.5 % 89.2 % 89.0 % Cost of sales – services (10,217) (10,027) (9,252) % of service sales 86.8 % 88.7 % 88.0 % Severance and other charges (87) (92) (100) Other unallocated, net 1,043 1,233 1,012 Total cost of sales $ (64,113) $ (59,092) $ (57,697) The following discussion of material changes in our consolidated cost of sales for products and services should be read in tandem with the preceding discussion of changes in our consolidated net sales and our business segment results of operations.
Our consolidated operating costs and expenses was as follows (in millions): 2025 2024 2023 Operating costs and expenses – products $ (57,020) $ (54,852) $ (50,206) % of product sales 91.0 % 92.5 % 89.2 % Operating costs and expenses – services (11,339) (10,217) (10,027) % of service sales 91.5 % 86.8 % 88.7 % Impairment and other charges (66) (87) (92) Other unallocated, net 996 1,043 1,233 Total operating costs and expenses $ (67,429) $ (64,113) $ (59,092) The following discussion of material changes in our consolidated operating costs and expenses for products and services should be read in tandem with the preceding discussion of changes in our consolidated sales and our business segment results of operations.
MFC’s operating results included the following (in millions): 2024 2023 2022 Net sales $ 12,682 $ 11,253 $ 11,317 Operating profit 413 1,541 1,637 Operating margin 3.3 % 13.7 % 14.5 % Backlog at year-end $ 38,783 $ 32,229 $ 28,735 MFC’s net sales in 2024 increased $1.4 billion, or 13%, compared to 2023.
MFC’s operating results included the following (in millions): 2025 2024 2023 Sales $ 14,450 $ 12,682 $ 11,253 Operating profit 1,989 413 1,541 Operating margin 13.8 % 3.3 % 13.7 % Backlog at year-end $ 46,650 $ 38,783 $ 32,229 MFC’s sales in 2025 increased $1.8 billion, or 14%, compared to 2024.
If we incur costs in excess of funds obligated on the contract or in advance of a contract award, this negatively affects our cash flows, and we may be at risk for reimbursement of the excess costs. Billing timetables and payment terms on our contracts vary based on a number of factors, including the contract type.
If we incur costs in excess of funds obligated on the contract or in advance of a contract award, this negatively affects our cash flows, and we may be at risk for reimbursement of the excess costs.
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.
Except for potential impacts to our programs resulting from supply chain disruptions, inflation, and tariffs, we have not identified any additional developing trends in operating costs and expenses for products and services that could have a material impact on our future operations. 33 Table of Contents Product Costs Product costs increased $2.2 billion, or 4%, in 2025 as compared to 2024.
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.
Our consolidated results of operations were as follows (in millions, except per share data): 2025 2024 2023 Sales $ 75,048 $ 71,043 $ 67,571 Operating costs and expenses (67,429) (64,113) (59,092) Gross profit 7,619 6,930 8,479 Other income, net 112 83 28 Operating profit 7,731 7,013 8,507 Interest expense (1,118) (1,036) (916) Non-service FAS pension (expense) income (874) 62 443 Other non-operating income, net 183 181 64 Earnings before income taxes 5,922 6,220 8,098 Income tax expense (905) (884) (1,178) Net earnings $ 5,017 $ 5,336 $ 6,920 Diluted earnings per common share $ 21.49 $ 22.31 $ 27.55 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.
Aeronautics’ operating results included the following (in millions): 2024 2023 2022 Net sales $ 28,618 $ 27,474 $ 26,987 Operating profit 2,523 2,825 2,867 Operating margin 8.8 % 10.3 % 10.6 % Backlog at year-end $ 62,763 $ 60,156 $ 56,630 Aeronautics’ net sales in 2024 increased $1.1 billion, or 4%, compared to 2023.
Aeronautics’ operating results included the following (in millions): 2025 2024 2023 Sales $ 30,257 $ 28,618 $ 27,474 Operating profit 2,086 2,523 2,825 Operating margin 6.9 % 8.8 % 10.3 % Backlog at year-end $ 59,435 $ 62,763 $ 60,156 Aeronautics’ sales in 2025 increased $1.6 billion, or 6%, compared to 2024.
Additionally, we continue to see international demand for our tactical and strike missile products, where we received orders from Poland for precision fire systems and for Joint Air-to-Surface Standoff Missile (JASSM). In 2024, international customers accounted for 32% of RMS’ net sales.
Additionally, we continue to see international demand for our tactical and strike missile products and fire control systems, where we received orders for 31 Table of Contents precision fire systems, Hellfire, and for Joint Air-to-Surface Standoff Missile (JASSM) from multiple nations, and for our Apache fire control system from Poland. In 2025, international customers accounted for 34% of RMS’ sales.
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.
Net Earnings We reported net earnings of $5.0 billion ($21.49 per share) in 2025 and $5.3 billion ($22.31 per share) in 2024. Net earnings and earnings per share in 2025 were affected by the factors mentioned above. Earnings per share also benefited from a net decrease of approximately 5.7 million weighted average common shares outstanding in 2025 compared to 2024.
For example, most of the environmental costs we incur for environmental remediation related to sites operated in prior years are allocated to our current operations as general and administrative costs under FAR provisions and supporting advance agreements reached with the U.S. Government. We closely monitor compliance with and the consistent application of our critical accounting policies related to contract accounting.
For example, most of the environmental costs we incur for environmental remediation related to sites operated in prior years are allocated to our current operations as general and administrative costs under FAR provisions and a supporting settlement agreement reached with the U.S.
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 sales were as follows (in millions): 2025 2024 2023 Products $ 62,654 $ 59,277 $ 56,265 % of total sales 83.5 % 83.4 % 83.3 % Services 12,394 11,766 11,306 % of total sales 16.5 % 16.6 % 16.7 % Total sales $ 75,048 $ 71,043 $ 67,571 Substantially all of our contracts are accounted for using the percentage-of-completion cost-to-cost method.
We also actively manage our pension obligations and expect to continue to opportunistically manage our pension liabilities through the purchase of group annuity contracts or other actions for portions of our outstanding defined benefit pension obligations using assets from the pension trust. See “Note 11 – Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements for additional information.
We also actively manage our pension obligations and expect to continue to opportunistically manage our pension liabilities through additional contributions at our discretion, the purchase of group annuity contracts or other actions for portions of our outstanding defined benefit pension obligations using assets from the pension trust.
Space’s major programs include the Trident II D5 Fleet Ballistic Missile (FBM), Orion Multi-Purpose Crew Vehicle (Orion), Next Generation Overhead Persistent Infrared (Next Gen OPIR) system, Global Positioning System (GPS) III, hypersonics and transport layer programs and Next Generation Interceptor (NGI).
Space is also responsible for various classified systems and services in support of vital national security systems. Space’s major programs include the Trident II D5 Fleet Ballistic Missile (FBM), Orion Multi-Purpose Crew Vehicle (Orion), Next Generation Overhead Persistent Infrared (Next Gen OPIR) system, Global Positioning System (GPS) III, hypersonics and Transport and Tracking Layer programs and Next Generation Interceptor (NGI).
See “Note 1 – Organization and Significant Accounting Policies” included in our Notes to Consolidated Financial Statements for additional information. Income Tax Expense Our effective income tax rate was 14.2% for 2024 and 14.5% for 2023.
Other non-operating income, net in 2025 was $183 million, compared to $181 million in 2024. See “Note 1 – Organization and Significant Accounting Policies” included in our Notes to Consolidated Financial Statements for additional information. Income Tax Expense Our effective income tax rate was 15.3% for 2025 and 14.2% for 2024.
At December 31, 2024, we had the following outstanding letters of credit, surety bonds and third-party guarantees (in millions): Total Commitment Less Than 1 Year Standby letters of credit (a) $ 2,318 $ 1,233 Surety bonds 351 351 Third-party Guarantees 351 231 Total commitments $ 3,020 $ 1,815 (a) Approximately $708 million of standby letters of credit in the “Less Than 1 Year” category are expected to renew for additional periods until completion of the contractual obligation.
At December 31, 2025, we had the following outstanding letters of credit, surety bonds and third-party guarantees (in millions): Total Commitment Less Than 1 Year Standby letters of credit (a) $ 3,054 $ 1,254 Surety bonds 483 482 Third-party Guarantees 150 20 Total commitments $ 3,687 $ 1,756 (a) Approximately $1.0 billion of standby letters of credit in the “Less Than 1 Year” category are expected to renew for additional periods until completion of the contractual obligation.
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.
These items are not allocated to the business segments and, therefore, are not allocated to operating costs and expenses for products or services. Other unallocated, net reduced operating expenses by $996 million and $1.0 billion in 2025 and 2024.
The following discussion of material changes in our consolidated net sales should be read in tandem with the subsequent discussion of changes in our consolidated cost of sales and our business segment results of operations because changes in our sales are typically accompanied by a corresponding change in our cost of sales due to the nature of the percentage-of-completion cost-to-cost method. 33 Table of Contents Product Sales Product sales increased $3.0 billion, or 5%, in 2024 as compared to 2023.
The following discussion of material changes in our consolidated sales should be read in tandem with the subsequent discussion of changes in our consolidated operating costs and expenses and our business segment results of operations because changes in our sales are typically accompanied by a corresponding change in our operating costs and expenses due to the nature of the percentage-of-completion cost-to-cost method.
We may also make additional contributions at our discretion. 42 Table of Contents The following table provides a summary of our cash flow information followed by a discussion of the key elements (in millions): 2024 2023 2022 Cash and cash equivalents at beginning of year $ 1,442 $ 2,547 $ 3,604 Operating activities Net earnings 5,336 6,920 5,732 Noncash adjustments 3,300 1,334 2,455 Changes in working capital (294) 317 (733) Other, net (1,370) (651) 348 Net cash provided by operating activities 6,972 7,920 7,802 Net cash used for investing activities (1,792) (1,694) (1,789) Net cash used for financing activities (4,139) (7,331) (7,070) Net change in cash and cash equivalents 1,041 (1,105) (1,057) Cash and cash equivalents at end of year $ 2,483 $ 1,442 $ 2,547 Operating Activities Net cash provided by operating activities decreased $948 million in 2024 compared to 2023.
The following table provides a summary of our cash flow information followed by a discussion of the key elements (in millions): 2025 2024 2023 Cash and cash equivalents at beginning of year $ 2,483 $ 1,442 $ 2,547 Operating activities Net earnings 5,017 5,336 6,920 Noncash adjustments 4,523 3,300 1,334 Changes in working capital 441 (294) 317 Other, net (1,424) (1,370) (651) Net cash provided by operating activities 8,557 6,972 7,920 Net cash used for investing activities (1,977) (1,792) (1,694) Net cash used for financing activities (4,942) (4,139) (7,331) Net change in cash and cash equivalents 1,638 1,041 (1,105) Cash and cash equivalents at end of year $ 4,121 $ 2,483 $ 1,442 Operating Activities Net cash provided by operating activities increased $1.6 billion in 2025 compared to 2024.
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 rates for all periods benefited from research and development tax credits, dividends paid to our defined contribution plans with an employee stock ownership plan feature, tax deductions for foreign derived intangible income and employee equity awards. On July 4, 2025, the President signed into law the Tax Act.
Net sales and operating profit of our business segments exclude intersegment sales, cost of sales and profit as these activities are eliminated in consolidation and thus are not included in management’s evaluation of performance of each segment.
We organize our business segments based on the nature of products and services offered. Sales and operating profit of our business segments exclude intersegment sales, operating costs and expenses and profit as these activities are eliminated in consolidation and thus are not included in management’s evaluation of performance of each segment.
Costs incurred and allocated to contracts are reviewed for compliance with U.S. Government regulations by our personnel and are subject to audit by the Defense Contract Audit Agency.
Government. 45 Table of Contents We closely monitor compliance with and the consistent application of our critical accounting policies related to contract accounting. Costs incurred and allocated to contracts are reviewed for compliance with U.S. Government regulations by our personnel and are subject to audit by the Defense Contract Audit Agency.
Our principal source of liquidity is our cash from operations. However, we also have access to credit markets, if needed, for liquidity or general corporate purposes. This access includes our $3.0 billion revolving credit facility or the ability to issue commercial paper (see “Note 10 – Debt” included in our Notes to Consolidated Financial Statements for additional information).
Our principal source of liquidity is our cash from operations and access to credit markets. Access to credit markets includes our revolving credit facilities, including the ability to issue commercial paper (see “Note 10 – Debt” included in our Notes to Consolidated Financial Statements for additional information).
Notwithstanding these actions, the impact of our postretirement benefit plans on our earnings may be volatile in that the amount of expense we record and the funded status for our postretirement benefit plans may materially change from year to year because the calculations are sensitive to changes in several key economic assumptions, including interest rates, actual rates of return on plan assets and other actuarial assumptions including participant longevity, as well as the timing of cash funding. 47 Table of Contents Actuarial Assumptions The benefit obligations and assets of our postretirement benefit plans are measured at the end of each year, or more frequently, upon the occurrence of certain events such as a significant plan amendment (including in connection with a pension risk transfer transaction), settlement, or curtailment.
Notwithstanding these actions, the impact of these plans on our earnings may be volatile in that the amount of expense we record and the funded status may materially change from year to year because the calculations are sensitive to changes in several key economic assumptions, including interest rates, actual rates of return on plan assets and other actuarial assumptions including participant longevity, as well as the timing of cash funding.
We generally bill and collect cash more frequently under cost-reimbursable contracts, which represented approximately 40% of the sales we recorded in 2024, as we are authorized to bill as the costs are incurred. A number of our fixed-price contracts may provide for performance-based payments, which allow us to bill and collect cash as we perform on the contract.
Billing timetables and payment terms on our contracts vary based on a number of factors, including the contract type. We generally bill and collect cash more frequently under cost-reimbursable contracts, which represented approximately 40% of the sales we recorded in 2025, as we are authorized to bill as the costs are incurred.

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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 changeWe regularly monitor changes to counterparty credit quality as well as our concentration of credit exposure to individual counterparties. We do not hold or issue derivative financial instruments for trading or speculative purposes. We maintain a separate trust that includes investments to fund certain of our non-qualified deferred compensation plans.
Biggest changeWe regularly monitor changes to counterparty credit quality as well as our concentration of credit exposure to individual counterparties. We maintain a separate trust that includes investments to fund certain of our non-qualified deferred compensation plans.
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.
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, 2025. We use derivative instruments principally to reduce our exposure to market risks from changes in foreign currency exchange rates and 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, 2024 and 2023.
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, 2025 and 2024.
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).
The aggregate notional amount of our outstanding foreign currency hedges at December 31, 2025 and 2024 was $7.2 billion and $7.5 billion. At December 31, 2025 and 2024, 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).
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
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, 2025. 49 Table of Contents
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.
As of December 31, 2025, investments in the trust totaled $2.0 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.
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.
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 $22.0 billion at December 31, 2025 and the outstanding principal amount of debt, including short-term and long-term debt, was $22.9 billion, excluding unamortized discounts and issuance costs of $1.2 billion.

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