Lockheed Martin

A 2018–2020 IRS Notice of Proposed Adjustment was resolved in Q4 2025; an agreed Revenue Agent Report for 2018–2022 federal returns resolved remaining open federal audit issues for those years, and the company is regularly under audit by U.S. and foreign authorities.

Actual results may differ materially due to factors such as:

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

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

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

•the timing of contract awards or contract definitization, decisions by government customers to impose contract terms following undefinitized contract actions, achievement of performance milestones, customer acceptance of product deliveries, and receipt of customer payments;

•our ability to recover costs under U.S. Government contracts, the mix of fixed-price and cost-reimbursable contracts and the risks inherent in preparing estimates for fixed-price contracts (particularly for complex and technologically advanced programs);

•customer procurement and other policies, laws, regulations and executive actions that affect our and our industry’s, programs, future opportunities, and financial performance, including those relating to mission priorities, competing domestic and international spending, contracting terms (such as fixed-price requirements), acquisition process reforms, treatment of contractor performance issues, and contractor access to competitive opportunities;

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

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•performance and/or financial viability of key suppliers, teammates, joint ventures (including United Launch Alliance, for which we have provided and expect to provide additional financial guarantees), joint venture partners, subcontractors and customers;

•changes in economic, capital market and political conditions in the U.S. and globally;

•the impact of inflation and other cost pressures;

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

•foreign policy and international trade actions taken by governments such as tariffs, sanctions, embargoes, export and import controls, buying preferences, and other trade restrictions;

•our success expanding into and doing business in adjacent markets and internationally and the risks posed by international sales, including potential effects from fluctuations in currency exchange rates;

•changes in non-U.S. national priorities and government budgets and planned orders;

•the competitive environment for our products and services;

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

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

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

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

•our ability to implement and continue, and the timing and impact of, capitalization changes such as share repurchases, dividend payments and financing transactions, including as a result of presidential executive orders;

•the accuracy of our estimates and projections;

•changes in pension plan assumptions and actual returns on pension assets; cash funding requirements and pension annuity contracts and associated charges;

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

•the satisfaction of conditions to (including regulatory approvals) and consummation of our announced acquisition of Ultra Maritime, if at all, the timing and terms of any financing for such acquisition and the impact thereof on our indebtedness and capital allocation, our ability to successfully integrate the Ultra Maritime business and realize synergies and other expected benefits of the transaction and the potential for disruption to our or Ultra Maritime's business, customer and supplier relationships, and retention of key personnel during the pendency of the transaction;

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

•the risk of an impairment of our assets, including the potential impairment of goodwill and intangibles;

•the availability and adequacy of our insurance and indemnities;

•compliance with laws, regulations, policies, and customer requirements relating to environmental matters;

•the impact of public health crises, natural disasters and other severe weather conditions on our business and financial results, including supply chain disruptions and delays, employee absences, and program delays;

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

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

Additional losses may also be needed for the referenced Missiles and Fire Control and Rotary and Mission Systems programs, and any such losses could be material to financial results in any period recognized.

Aeronautics’ operating profit in 2025 decreased $437 million, or 17%, compared to 2024. The decrease was primarily attributable to higher reach-forward losses of $395 million recognized on a classified program ($950 million recognized in the second quarter of 2025 compared to $555 million recognized in 2024); about $180 million for the C-130 program due to higher unfavorable profit adjustments and production volume; and $155 million due to the favorable resolution of the claim on the C-5

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Galaxy aircraft contract recognized in 2024. These decreases were partially offset by increased profit of approximately $270 million on the F-35 program due to higher volume and favorable profit adjustments on production and sustainment contracts. See “Note 1 – Organization and Significant Accounting Policies” for more details on program losses.

As of June 28, 2026, our ending backlog was $230.4 billion. The increase in backlog of $36.8 billion during the six months ended June 28, 2026 was primarily due to an undefinitized contractual action (UCA) awarded for the THAAD program at our MFC business segment. We expect to recognize approximately 30% of our backlog over the next 12 months and a total of approximately 50% over the next 24 months as revenue with the remainder recognized thereafter.

Income Taxes

Our effective income tax rates were 15.7% and 15.9% for the quarter and six months ended June 28, 2026 and 18.0% and 16.3% for the quarter and six months ended June 29, 2025. The lower effective income tax rates for the quarter and six months ended June 28, 2026 were primarily attributable to lower interest expense on our uncertain tax position and the reach-forward losses recognized in 2025. The rates for all periods benefited from the tax deductions for foreign derived deduction eligible income, research and development tax credits, dividends paid to our defined contribution plans with an employee stock ownership plan feature and employee equity awards.

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