Lockheed Martin LMT · USD

Information on Business SegmentsOverviewWe operate in four business segments: Aeronautics, MFC, RMS and Space. We organize our business segments based on the nature of products and services offered. Following is a brief description of the activities of our business segments:•Aeronautics – Engaged in the research, design, development, manufacture, integration, sustainment, support and upgrade of advanced military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies. •Missiles and Fire Control – 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. •Rotary and Mission Systems – Designs, manufactures, services and supports various military and commercial helicopters, sea- and land-based missile defense systems, radar systems, laser systems, sea- and air-based mission and combat systems, command and control mission solutions, cyber solutions, simulation and training solutions, and services and supports surface ships. •Space – 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. Space is also responsible for various classified systems and services in support of vital national security systems. Operating profit for our Space business segment also includes our share of earnings for our 50% ownership interest in ULA, which provides expendable launch services to the U.S. Government and commercial customers. Our investment in ULA totaled $551 million at both December 31, 2025 and 2024.Selected Financial Data by Business SegmentSales 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. Our Chief Executive Officer (CEO) and Chief Operating Officer (COO) serve as our Chief Operating Decision Makers (CODMs) and are responsible for reviewing segment performance and making decisions regarding resource allocation.

Legal Proceedings, Commitments and ContingenciesLegal ProceedingsWe are a party to litigation and other proceedings that arise in the ordinary course of our business, including matters arising under provisions relating to the protection of the environment, and are subject to contingencies related to certain businesses we previously owned. These types of matters could result in fines, penalties, cost reimbursements or contributions, compensatory or treble damages or non-monetary sanctions or relief. We believe the probability is remote that the outcome of each of these matters, including the legal proceedings described below, will have a material adverse effect on the company as a whole, notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings and cash flows in the period in which it is recognized. Among the factors that we consider in this assessment are the nature of existing legal proceedings and claims, the asserted or possible damages or loss contingency (if estimable), the progress of the case, existing law and precedent, the opinions or views of legal counsel and other advisers, our experience in similar cases and the experience of other companies, the facts available to us at the time of assessment and how we intend to respond to the proceeding or claim. Our assessment of these factors may change over time as individual proceedings or claims progress.Although we cannot predict the outcome of legal or other proceedings with certainty, where there is at least a reasonable possibility that a loss may be incurred, GAAP requires us to disclose an estimate of the reasonably possible loss or range of loss or make a statement that such an estimate cannot be made. We follow a thorough process in which we seek to estimate the reasonably possible loss or range of loss, and only if we are unable to make such an estimate do we conclude and disclose that an estimate cannot be made. Accordingly, unless otherwise indicated below in our discussion of legal proceedings, a reasonably possible loss or range of loss associated with any individual legal proceeding cannot be estimated.Securities-Related ActionsOn July 28, 2025, a putative class action was filed—and subsequently amended on January 12, 2026—in United States District Court for the Southern District of New York against us and certain current and former members of our senior management.

DebtOur total debt consisted of the following (in millions): 20252024Notes4.95% due 2025$— $500 3.55% due 20261,000 1,000 5.10% due 2027750 750 4.45% and 4.15% due 20281,000 500 4.50% due 2029650 650 1.85% and 4.40% due 20301,150 400 4.70% due 2031600 600 3.90% due 2032800 800 5.25% due 20331,000 1,000 4.75% and 4.80% due 20341,450 1,450 3.60% and 5.00% due 20351,250 500 4.50% and 6.15% due 20361,054 1,054 4.07% due 20421,336 1,336 3.80% due 20451,000 1,000 4.70% due 20461,326 1,326 2.80% due 2050750 750 4.09% due 20521,579 1,578 4.15% due 2053850 850 5.70% due 20541,000 1,000 5.20% due 20551,050 1,050 4.30% due 2062650 650 5.90% due 2063750 750 5.20% due 2064750 750 Other notes with rates from 4.85% to 8.50%, due 2026 to 20411,169 1,313 Total debt22,914 21,557 Less: unamortized discounts and issuance costs(1,214)(1,287)Total debt, net21,700 20,270 Less: current portion(1,168)(643)Long-term debt, net$20,532 $19,627 Revolving Credit FacilitiesOn December 5, 2025, we entered into a new unsecured 364-Day Revolving Credit Agreement (the 364-Day Revolving Credit Agreement), which provides for a revolving credit facility of $3.0 billion. The 364-Day Revolving Credit Agreement matures on December 4, 2026, however, we may elect to convert the entire outstanding balance into a term loan for an additional one-year, payable on December 4, 2027. The 364-Day Revolving Credit Agreement is available for any of our lawful corporate purposes, including the support of commercial paper borrowings. There were no borrowings under the 364-Day Revolving Credit Agreement at December 31, 2025.On August 24, 2022, we entered into a Revolving Credit Agreement (the Revolving Credit Agreement) with various banks which provides for a $3.0 billion five-year unsecured revolving credit facility. Effective August 28, 2025, we amended the Revolving Credit Agreement to extend the expiration date of the Revolving Credit Agreement from August 24, 2029 to August 24, 2030. The Revolving Credit Agreement is available for any of our lawful corporate purposes, including supporting commercial paper borrowings. There were no borrowings under the Revolving Credit Agreement at December 31, 2025 and 2024.Commercial PaperWe have agreements in place with financial institutions to provide for the issuance of commercial paper. The outstanding balance of commercial paper can fluctuate daily and the amount outstanding during the period may be greater or less than the amount reported at the end of the period.

Income TaxesIncome before Income Tax ExpenseU.S. and foreign income before income tax expense are as follows (in millions):2025Income before income tax expense:U.S.$5,531 Foreign 391 Total income before income tax expense$5,922 Income Tax ProvisionsFederal and foreign income tax expense consisted of the following (in millions):202520242023Federal income tax expense (benefit):Current$411 $1,352 $1,574 Deferred374 (604)(503)Total federal income tax expense785 748 1,071 Foreign income tax expense (benefit):Current122 120 102 Deferred(2)16 5 Total foreign income tax expense120 136 107 Total federal and foreign income tax expense$905 $884 $1,178 Our total net state income tax expense was $84 million for 2025, $121 million for 2024, and $115 million for 2023. State income taxes are allowable costs in establishing prices for the products and services we sell to the U.S. Government. Therefore, state income tax expenses are included in operating costs and expenses. As a result, the impact of certain transactions on our operating profit and of other matters presented in these consolidated financial statements is disclosed net of state income taxes. A reconciliation of the U.S. federal statutory income tax expense to actual income tax expense is as follows (in millions):2025AmountRateIncome tax expense at the U.S. federal statutory tax rate$1,244 21.0 %Research and development tax credit(187)(3.2)Effects of cross-border tax laws(97)(1.6)Changes in unrecognized tax benefitsResearch and development tax credit(142)(2.4)Settlement with tax authorities110 1.9 Other(48)(0.7)Foreign tax effects72 1.2 Tax deductible dividends(68)(1.1)Other adjustments21 0.2 Income tax expense$905 15.3 %A reconciliation of the U.S. federal statutory income tax expense to actual income tax expense is as follows (in millions):20242023AmountRateAmountRateIncome tax expense at the U.S. federal statutory tax rate$1,306 21.0 %$1,701 21.0 %Foreign derived intangible income deduction(210)(3.4)(185)(2.3)Research and development tax credit(207)(3.3)(227)(2.8)Tax deductible dividends(69)(1.1)(69)(0.9)Excess tax benefits for stock-based payment awards(20)(0.3)(25)(0.3)Other, net (a)84 1.3 (17)(0.2)Income tax expense$884 14.2 %$1,178 14.5 %(a)Other, net includes foreign income tax expenses for all years.

Stock-Based CompensationStock-Based Compensation PlansUnder plans approved by our stockholders, we are authorized to grant key employees stock-based incentive awards, including options to purchase common stock, stock appreciation rights, RSUs, PSUs or other stock units. At December 31, 2025, inclusive of the shares reserved for outstanding RSUs and PSUs, we had approximately 7.1 million shares reserved for issuance under the plans. At December 31, 2025, we had no outstanding options to purchase common stock and have not issued stock options to employees since 2012. At December 31, 2025, approximately 4.3 million of the shares reserved for issuance remained available for grant under our stock-based compensation plans. We issue new shares when restrictions on RSUs and PSUs have been satisfied. The minimum vesting period under our equity compensation plan for employees generally is one year, although most RSUs granted annually to executives and other key employees vest over three years. Award agreements may provide for vesting periods between one and three years and in certain circumstances less than one year, pro-rated vesting periods or vesting following termination of employment in the case of death, disability, divestiture, retirement, change of control or layoff. The maximum term of any award is 10 years.During 2025, 2024 and 2023, we recorded noncash stock-based compensation expense totaling $304 million, $277 million and $265 million, which is included as a component of other unallocated, net on our consolidated statements of earnings. The net impact to earnings for the respective years was $240 million, $219 million and $209 million.As of December 31, 2025, we had $349 million of unrecognized compensation cost related to nonvested awards, which is expected to be recognized over a weighted average period of 1.8 years. We had no stock options outstanding or exercised during 2025, 2024, or 2023, and accordingly received zero cash from option exercises in those three years. In addition, our income tax liabilities for 2025, 2024 and 2023 were reduced by $70 million, $67 million and $78 million due to recognized tax benefits on stock-based compensation arrangements.Restricted Stock Units The following table summarizes activity related to nonvested RSUs:Numberof RSUs(In thousands)Weighted AverageGrant-Date FairValue Per ShareNonvested at December 31, 2024982 $434.01 Granted982 437.95 Vested(516)415.73 Forfeited(83)442.

Leases We generally enter into operating lease agreements for facilities, land and equipment. Our ROU operating lease assets were $976 million at December 31, 2025. Operating lease liabilities were $1.1 billion, of which $825 million were classified as noncurrent, at December 31, 2025. New ROU operating lease assets and liabilities entered into during 2025 were $133 million. The weighted average remaining lease term and discount rate for our operating leases were approximately 6.6 years and 3.8% at December 31, 2025.We recognized operating lease expense of $258 million, $260 million and $273 million in 2025, 2024 and 2023. In addition, we made cash payments of $256 million, $258 million and $267 million for operating leases in 2025, 2024 and 2023, which are included in cash flows from operating activities in our consolidated statements of cash flows.

We believe cybersecurity is critical to advancing our 21st Century Security vision and enabling our digital transformation efforts. As an aerospace and defense company, we face a multitude of cybersecurity threats that range from attacks common to most industries, such as ransomware and denial-of-service, to attacks from more advanced and persistent, highly organized adversaries, including nation state actors, some of which target the defense industrial base and other critical infrastructure sectors. Our customers, suppliers, subcontractors and joint venture partners face similar cybersecurity threats, and a cybersecurity incident impacting us or any of these entities could materially adversely affect our operations, performance and results of operations. These cybersecurity threats and related risks make it imperative that we strive to be a leader in the information security field, and we expend considerable resources on cybersecurity. Our corporate information security organization has implemented a governance structure and processes to assess, identify, manage and report cybersecurity risks. 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. 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. 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. 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. In November 2025, we submitted our initial CMMC certification as required by the program.

InventoriesInventories consisted of the following (in millions):20252024Materials, spares and supplies$659 $661 Work-in-process2,667 2,617 Finished goods198 196 Total inventories$3,524 $3,474 Costs incurred to fulfill a contract in advance of the contract being awarded are included in inventories as work-in-process if we determine that those costs relate directly to a contract or to an anticipated contract that we can specifically identify and determine that the contract award is probable, the costs generate or enhance resources that will be used in satisfying performance obligations, and the costs are recoverable (referred to as pre-contract costs). These advanced procurement costs are generally incurred in order to enhance our ability to achieve schedule and certain customer milestones. Pre-contract costs that are initially capitalized in inventory are generally recognized as operating costs consistent with the transfer of products and services to the customer upon the receipt of the anticipated contract. All other pre-contract costs, including start-up costs, are expensed as incurred. As of both December 31, 2025 and 2024, $1.5 billion of pre-contract costs (primarily F-35 and classified contracts at our Aeronautics business segment and Sikorsky programs at our RMS business segment) were included in work-in-process inventories.