AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 18/10/2026
Moat56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · Interdependent contractual deliverables and demonstrated F-35 production and sustainment demand support incumbent switching friction. Its magnitude and superiority over competing suppliers are not quantified.
durability · 2/4 · Long-cycle operations and backlog exceeding two-and-a-half years of sales support persistence, while termination rights and procurement changes limit certainty. New missile agreements strengthen demand visibility but do not demonstrate completed capacity expansion.
customer dependency · 3/4 · Higher F-35 production and sustainment volume demonstrates continuing customer reliance, reinforced by complex integrated deliverables and substantial backlog. Dependency is assessed indirectly from operating demand; no retention rate or supplier exclusivity is disclosed.
erosion resilience · 2/4 · Continuing demand and stronger first-half 2026 results coexist with significant classified-program problems, accumulated losses and procurement changes favoring competition. Resilience is mixed rather than disproved by generic risks alone.
Pricing power44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 1/4 · Actual recovery of pension costs through government-contract pricing provides some protection, but approximately $1.5 billion of cumulative MFC program losses demonstrates materially inadequate contract economics. Negotiated fixed fees constrain repricing. No unit-price trend is available.
retention · 3/4 · Higher F-35 production and sustainment volume and substantial backlog demonstrate continuing demand. This is indirect operating evidence of retention, rather than a measured renewal rate; termination rights remain meaningful.
margin resilience · 2/4 · First-half 2026 operating profit recovered substantially on higher sales, and government pricing recovers certain pension costs. However, cumulative program losses and expected loss-making options show incomplete protection against cost overruns. Profit recovery alone does not establish pricing power.
contractual freedom · 1/4 · Fees negotiated at inception, customer procurement strategies shifting risk to contractors and government termination rights demonstrate limited freedom over economic terms. The company retains negotiating scope, but broad unilateral repricing ability is not evidenced.
Predictability94
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 75.00
- Revenue growth volatility (pp)
- 2.86
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 1.28
Financial strength51
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 69.41
- netDebtEbitGrade
- 54.52
- interestCoverageGrade
- 53.77
- currentRatioGrade
- 26.95
- Debt / FCF (x)
- 3.14
- Net debt / operating income (x)
- 2.27
- Interest coverage (x)
- 6.92
- Current ratio (x)
- 1.09
Capital allocation100
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 33.17
- 3-year average dilution (%)
- -4.08
- 3-year average SBC / revenue (%)
- 0.40
- cashConversionGrade
- 100.00
Management56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Actual research and capital investment, positive free cash flow, debt repayment and no first-half 2026 repurchases support funding discipline. Significant program losses and rising contract assets and inventories temper that assessment; investment returns are not established.
incentive alignment · 2/4 · Disclosed ownership requirements, clawbacks and trading restrictions support alignment, and the completed 2023–2025 cycle paid only 47% of target. Adjustments that excluded selected adverse items weaken a stronger conclusion. Actual executive ownership quantities are unavailable.
execution · 2/4 · Production and sustainment growth, generally steady deliveries and stronger 2026 financial results demonstrate operating achievements. Significant classified-program performance issues, recognized losses and continuing supplier problems establish mixed execution. Delivery execution is partly assessed from indirect operating evidence.
governance · 3/4 · Existing board and committee independence, annual elections, shareholder rights, full reported meeting attendance and documented auditor discussions support strong governance arrangements. The combined chairman and CEO role limits separation of authority, and disclosed arrangements do not prove exceptional oversight effectiveness.
Evidence
The products and services in our contracts are typically not distinct from one another due to their complex relationships and the significant contract management functions required to perform under the contract.
Note 1 / complex relationships among contractual products and services · Filed 29/01/2026
Higher product sales at Aeronautics were due to higher volume on F-35 production contracts, partially offset by the unfavorable cumulative adjustment to sales driven by recognizing a reach-forward loss on a classified contract in the second quarter of 2025.
MD&A / F-35 production volume and classified-contract loss · Filed 29/01/2026
The increase in service sales was primarily due to higher sales of approximately $620 million at Aeronautics as a result of higher volume on F-35 sustainment contracts.
MD&A / increased F-35 sustainment volume · Filed 29/01/2026
We finished 2025 with a record backlog of nearly $194 billion, representing more than two-and-a-half years of sales.
2025 Performance and Demand / backlog and sales coverage · Filed 26/03/2026
Although these tensions and conflicts may drive interest in specific products or services as countries seek to improve their security posture, our business primarily operates on a long-cycle basis.
MD&A / long-cycle business · Filed 23/07/2026
Contract Termination. The U.S. Government may terminate any of our government contracts at its convenience or for default based on our performance, either of which could adversely affect our business and financial performance.
Business / government contract termination rights · Filed 29/01/2026
defense contractors. In some areas of our business, customer requirements and acquisition processes are changing to encourage or facilitate expanded competition.
Competition / procurement changes encouraging expanded competition · Filed 29/01/2026
21 Table of Contents Aeronautics Classified Program We have experienced significant performance issues on an existing classified program at our Aeronautics business segment.
Note on development programs / Aeronautics classified-program performance issues · Filed 23/07/2026
As of June 28, 2026, cumulative losses recognized on the program remained at approximately $1.5 billion in total, of which, $1.1 billion remained accrued in other current liabilities on our consolidated balance sheets.
MFC Classified Program / cumulative recognized losses and accrued liability · Filed 23/07/2026
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.
Risk factors / potential customer substitution when deliveries are delayed · Filed 29/01/2026
Our customers continue to implement procurement strategies such as these that shift risk to contractors.
Development-program accounting / procurement strategies shifting risk to contractors · Filed 23/07/2026
Cost-plus-fixed-fee contracts provide a fixed fee that is negotiated at the inception of the contract and does not vary with actual costs.
Note 1 / negotiated cost-plus-fixed-fee terms · Filed 29/01/2026
We recover CAS pension cost through the pricing of our products and services on U.S.
FAS/CAS Pension Operating Adjustment / pension cost recovery through pricing · Filed 23/07/2026
Government contracts and, therefore, recognize CAS pension cost in each of our business segments’ sales and operating costs and expenses.
FAS/CAS Pension Operating Adjustment / government-contract sales and costs · Filed 23/07/2026
FINANCIAL INFORMATION ITEM 1. Financial Statements Lockheed Martin Corporation Consolidated Statements of Earnings (unaudited; in millions, except per share data) Quarters Ended Six Months Ended June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025 Sales Products $ 16,783 $ 15,149 $ 31,614 $ 30,085 Services 3,280 3,006 6,470 6,033 Total sales 20,063 18,155 38,084 36,118 Operating costs and expenses Products (15,063) (14,469) (28,461) (27,753) Services (2,862) (3,130) (5,646) (5,770) Impairment and other charges — (66) — (66) Other unallocated, net 308 244 547 528 Total operating costs and expenses (17,617) (17,421) (33,560) (33,061) Gross profit 2,446 734 4,524 3,057 Other income, net 33 14 18 63 Operating profit 2,479 748 4,542 3,120 Interest expense (266) (274) (535) (542) Non-service FAS pension expense (80) (99) (160) (197) Other non-operating income, net 45 42 105 72 Earnings before income taxes 2,178 417 3,952 2,453 Income tax expense (342) (75) (628) (399) Net earnings $ 1,836 $ 342 $ 3,324 $ 2,054 Earnings per common share Basic $ 7.98 $ 1.46 $ 14.45 $ 8.78 Diluted $ 7.94 $ 1.46 $ 14.38 $ 8.75 The accompanying notes are an integral part of these unaudited consolidated financial statements.
Consolidated Statements of Earnings / first-half 2026 and 2025 operating results · Filed 23/07/2026
5 Table of Contents Lockheed Martin Corporation Consolidated Statements of Cash Flows (unaudited; in millions) Six Months Ended June 28, 2026 June 29, 2025 Operating activities Net earnings $ 3,324 $ 2,054 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization 798 796 Stock-based compensation 180 141 Deferred income taxes 538 (561) Impairment and other charges — 66 Reach-forward losses on select programs — 1,615 Qualified defined benefit pension plans 184 223 Changes in assets and liabilities Receivables, net 545 (955) Contract assets (3,037) (2,178) Inventories (887) (461) Accounts payable 1,409 1,500 Contract liabilities 711 (360) Income taxes 43 251 Other, net (353) (521) Net cash provided by operating activities 3,455 1,610 Investing activities Capital expenditures (829) (805) Other, net (61) (340) Net cash used for investing activities (890) (1,145) Financing activities Repayments of long-term debt (1,168) (142) Proceeds from commercial paper, net — 1,449 Repurchases of common stock — (1,250) Dividends paid (1,612) (1,567) Other, net (115) (145) Net cash used for financing activities (2,895) (1,655) Net change in cash and cash equivalents (330) (1,190) Cash and cash equivalents at beginning of period 4,121 2,483 Cash and cash equivalents at end of period $ 3,791 $ 1,293 The accompanying notes are an integral part of these unaudited consolidated financial statements.
Consolidated Statements of Cash Flows / investment, dividends, debt repayment and repurchases · Filed 23/07/2026
The following table reconciles net cash provided by operating activities to free cash flow (in millions): Six Months Ended June 28, 2026 June 29, 2025 Cash from operations $ 3,455 $ 1,610 Capital expenditures (829) (805) Free cash flow $ 2,626 $ 805 Free cash flow during the six months ended June 28, 2026 increased $1.8 billion compared to the same period in 2025 primarily due to operating cash flow drivers described above.
Liquidity / free cash flow reconciliation · Filed 23/07/2026
In 2025, we: •Grew our top-line sales by 6% •Ended the year with record backlog, positioning us for future growth •Invested $2.0B in Independent Research & Development and $1.6B in Capital Expenditures Our Industry Leading Portfolio (2025 sales) $30.3 billion Aeronautics $14.5 billion Missiles and Fire Control $17.3 billion Rotary and Mission Systems $13.0 billion Space Advancing integrated multi-domain air superiority: Modernizing precision strike and missile defense: Furthering future flight, maritime security, battle management and mission technology: Pioneering space exploration and security: •F-35 Lightning II •F-16 Fighting Falcon •C-130 Hercules •F-22 Raptor •Skunkworks® •GMLRS •HIMARS •PAC-3, THAAD •PrSM •JASSM, LRASM •SNIPER and IRST21 •Black Hawk •CH-53K •Aegis •C2BMC •C6ISR •Training and Logistics •Next Gen OPIR GEO •Trident II / D5 •Orion •Next Generation Interceptor •GPS III •Conventional Prompt Strike Lockheed Martin Corporation 6801 Rockledge Drive Bethesda, MD 20817 www.lockheedmartin.com © 2026 Lockheed Martin Corporation
Performance Summary / 2025 growth and actual research and capital investment · Filed 26/03/2026
The Compensation Committee approved adjustments to Free Cash Flow and ROIC for the favorable tax impacts from the OBBB, to Free Cash Flow for unplanned pension contributions (net of tax) and tariffs and to ROIC for unplanned debt issuances, a non-operating pension settlement charge, a prior year change in interpretation of the law related to an uncertain tax position and a prior year loss on a specific strategic program.
Compensation Discussion and Analysis / approved incentive-performance adjustments · Filed 26/03/2026
2026 Proxy Statement 39 ABOUT LOCKHEED MARTIN CORPORATE GOVERNANCE DIRECTOR NOMINEES EXECUTIVE COMPENSATION AUDIT MATTERS STOCKHOLDER PROPOSAL OTHER INFORMATION Measure Weight Threshold (25% Payout) Target (100% Payout) Maximum (200% Payout) Calculated Payout Weighted Payout Relative TSR 50% 0.0% 0.0% Free Cash Flow* 25% 120.0% 30.0% ROIC* 25% 66.0% 17.0% Overall Payout Factor 47.0% * See Appendix A for definitions of non-GAAP measures.
Compensation Discussion and Analysis / realized 2023–2025 incentive payout · Filed 26/03/2026
Executive Compensation Practices Best Practices in Our Programs Practices we do not engage in or allow •Pay aligns with performance •Market-based (50th percentile) approach for determining NEO target pay levels •Caps on annual and long-term incentives, including when Total Stockholder Return (TSR) is negative •Supplemental discretionary clawback policy on variable pay •Double-trigger provisions for change in control •Robust stock ownership requirements •Low equity burn rate and dilution •No payment of dividends or dividend equivalents on unvested equity awards •Annual say-on-pay vote •No employment agreements •No option backdating, cash-out of underwater options or repricing (no employee options granted since 2012) •No gross-ups upon a change in control •No tax gross-ups on personal use of corporate aircraft •No individual change in control or severance agreements •No automatic acceleration of unvested incentive awards in the event of termination •No enhanced retirement formula or inclusion of long-term incentives in pensions •No enhanced death benefits for executives •No hedging or pledging of Company stock 2026 Proxy Statement 29 ABOUT LOCKHEED MARTIN CORPORATE GOVERNANCE DIRECTOR NOMINEES EXECUTIVE COMPENSATION AUDIT MATTERS STOCKHOLDER PROPOSAL OTHER INFORMATION 2025 Performance & Incentives Summary 2025 was a year of unprecedented demand for Lockheed Martin’s advanced, integrated capabilities.
Executive Compensation Practices / ownership, clawback and trading restrictions · Filed 26/03/2026
Our governance highlights include: BOARD-RELATED STOCKHOLDER RIGHTS-RELATED Entirely independent Board other than the Chairman One class of voting stock Strong and engaged independent Lead Director One share, one vote Entirely independent standing committees of the Board Annual election of directors Annual review of Board leadership structure Majority voting for directors in uncontested elections Annual Board and Committee evaluations Mandatory tender of resignation if majority vote not received in uncontested election Active Board refreshment Proactive, year-round stockholder engagement Regular executive sessions of independent directors No super-majority voting requirements Meaningful director stock ownership guidelines Market-standard proxy access Policy against “overboarding” Right to call a special meeting under the Bylaws Retirement policy Right to amend Bylaws Regular review of Committee Charters and Governance Guidelines No poison pill Access to officers and employees Active engagement with stockholder proponents Active succession planning for key executive roles Disclosure of related person transactions 100% attendance at 2025 Board and Committee meetings For a summary of our compensation best practices, see “Compensation Discussion and Analysis” beginning on page 29.
Corporate Governance / board independence, voting rights and attendance · Filed 26/03/2026
2 2026 Proxy Statement ABOUT LOCKHEED MARTIN CORPORATE GOVERNANCE DIRECTOR NOMINEES EXECUTIVE COMPENSATION AUDIT MATTERS STOCKHOLDER PROPOSAL OTHER INFORMATION Board Leadership Structure The Board has determined that a combined Chairman and CEO role along with a strong independent Lead Director best serves our current business needs Each year, and more frequently as conditions warrant, the Governance Committee reviews the Board leadership structure and determines whether to recommend any changes to the full Board.
Board Leadership Structure / combined chairman and CEO role · Filed 26/03/2026
The Audit Committee also discussed with EY, with and without management, the quality of the financial statements, clarity of the related disclosures, effectiveness of internal control over financial reporting and other items required by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the Securities and Exchange Commission (SEC).
Audit Committee Report / discussions with independent auditors · Filed 26/03/2026
We have experienced, and continue to experience, supply chain challenges, including supplier shortages and performance issues.
MD&A / ongoing supplier shortages and performance issues · Filed 23/07/2026
Although on‑time deliveries have generally been steady, pressures remain in certain areas, and we are proactively working with our suppliers to meet our contract commitments.
MD&A / generally steady on-time deliveries and remaining pressures · Filed 23/07/2026
Elevated demand has continued in 2026 with Lockheed Martin reaching landmark, long-term agreements with the Department of War to triple Patriot PAC-3 MSE missile production and quadruple THAAD production.
2025 Performance and Demand / 2026 long-term missile production agreements · Filed 26/03/2026
We previously disclosed that the options may be exercised over the next several years and, if performed, we expect they would each be at a loss.
MFC Classified Program / expected losses on production options · Filed 23/07/2026
