UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 25, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number: 1-11437 

LOCKHEED MARTIN CORPORATION

(Exact name of registrant as specified in its charter)

Maryland			52-1893632
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
6801 Rockledge Drive,	Bethesda,	Maryland	20817
(Address of principal executive offices)			(Zip Code)

(301) 897-6000

(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $1 par value	LMT	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non–accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 262,073,963 shares of our common stock, $1 par value per share, outstanding as of October 14, 2022.

Lockheed Martin Corporation

Form 10-Q

For the Quarterly Period Ended September 25, 2022

Table of Contents  

			Page
PART I. FINANCIAL INFORMATION
	ITEM 1.	Financial Statements (Unaudited)
		Consolidated Statements of Earnings for the Quarters and Nine Months Ended September 25, 2022 and September 26, 2021	3
		Consolidated Statements of Comprehensive Income for the Quarters and Nine Months Ended September 25, 2022 and September 26, 2021	4
		Consolidated Balance Sheets as of September 25, 2022 and December 31, 2021	5
		Consolidated Statements of Cash Flows for the Nine Months Ended September 25, 2022 and September 26, 2021	6
		Consolidated Statements of Equity for the Quarters Ended September 25, 2022 and September 26, 2021	7
		Consolidated Statements of Equity for the Nine Months Ended September 25, 2022 and September 26, 2021	8
		Notes to Consolidated Financial Statements	9
		Report of Independent Registered Public Accounting Firm	27
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	46
	ITEM 4.	Controls and Procedures	46
PART II. OTHER INFORMATION
	ITEM 1.	Legal Proceedings	48
	ITEM 1A.	Risk Factors	48
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
	ITEM 6.	Exhibits	51
SIGNATURE			52

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Lockheed Martin Corporation

Consolidated Statements of Earnings

(unaudited; in millions, except per share data)

	Quarters Ended				Nine Months Ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
Net sales
Products	$	14,011	$	13,475	$	39,266	$	41,486
Services	2,572		2,553		7,727		7,829
Total net sales	16,583		16,028		46,993		49,315
Cost of sales
Products	(12,547)		(11,838)		(35,103)		(36,985)
Services	(2,243)		(2,332)		(6,780)		(7,000)
Severance and restructuring charges	—		—		—		(36)
Other unallocated, net	327		444		875		1,345
Total cost of sales	(14,463)		(13,726)		(41,008)		(42,676)
Gross profit	2,120		2,302		5,985		6,639
Other income (expense), net	39		(8)		70		29
Operating profit	2,159		2,294		6,055		6,668
Interest expense	(145)		(141)		(421)		(423)
Non-service FAS pension income (expense)	111		(1,572)		(1,080)		(1,385)
Other non-operating (expense) income, net	(26)		98		(64)		200
Earnings before income taxes	2,099		679		4,490		5,060
Income tax expense	(321)		(65)		(670)		(794)
Net earnings	$	1,778	$	614	$	3,820	$	4,266
Earnings per common share
Basic	$	6.73	$	2.22	$	14.36	$	15.37
Diluted	$	6.71	$	2.21	$	14.31	$	15.32
Cash dividends paid per common share	$	2.80	$	2.60	$	8.40	$	7.80

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

Lockheed Martin Corporation

Consolidated Statements of Comprehensive Income

(unaudited; in millions)

	Quarters Ended				Nine Months Ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
Net earnings	$	1,778	$	614	$	3,820	$	4,266
Other comprehensive income, net of tax
Postretirement benefit plans
Net actuarial gain recognized due to plan remeasurements, net of tax of $44 million and $505 million in 2022 and $613 million in 2021	162		2,258		1,860		2,258
Amounts reclassified from accumulated other comprehensive loss, net of tax of $1 million and $27 million in 2022 and $30 million and $105 million in 2021	(2)		107		93		387
Pension settlement charge, net of tax of $314 million in 2022 and $355 million in 2021	—		1,310		1,156		1,310
Other, net, net of tax of $6 million and $12 million in 2022 and $4 million and $8 million in 2021	(126)		(55)		(237)		(51)
Other comprehensive income, net of tax	34		3,620		2,872		3,904
Comprehensive income	$	1,812	$	4,234	$	6,692	$	8,170

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

Lockheed Martin Corporation

Consolidated Balance Sheets

(in millions, except par value)

	September 25, 2022		December 31, 2021
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	2,430	$	3,604
Receivables, net	2,484		1,963
Contract assets	12,333		10,579
Inventories	3,113		2,981
Other current assets	600		688
Total current assets	20,960		19,815
Property, plant and equipment, net	7,629		7,597
Goodwill	10,764		10,813
Intangible assets, net	2,521		2,706
Deferred income taxes	3,116		2,290
Other noncurrent assets	7,040		7,652
Total assets	$	52,030	$	50,873
Liabilities and equity
Current liabilities
Accounts payable	$	2,622	$	780
Salaries, benefits and payroll taxes	3,151		3,108
Contract liabilities	8,059		8,107
Other current liabilities	2,515		2,002
Total current liabilities	16,347		13,997
Long-term debt, net	11,480		11,670
Accrued pension liabilities	5,745		8,319
Other noncurrent liabilities	6,492		5,928
Total liabilities	40,064		39,914
Stockholders’ equity
Common stock, $1 par value per share	261		271
Additional paid-in capital	—		94
Retained earnings	19,839		21,600
Accumulated other comprehensive loss	(8,134)		(11,006)
Total stockholders’ equity	11,966		10,959
Total liabilities and equity	$	52,030	$	50,873

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5

Lockheed Martin Corporation

Consolidated Statements of Cash Flows

(unaudited; in millions)

	Nine Months Ended
	September 25, 2022		September 26, 2021
Operating activities
Net earnings	$	3,820	$	4,266
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	965		999
Stock-based compensation	195		189
Deferred income taxes	(540)		(235)
Pension settlement charge	1,470		1,665
Severance and restructuring charges	—		36
Changes in assets and liabilities
Receivables, net	(521)		(289)
Contract assets	(1,754)		(3,152)
Inventories	(132)		642
Accounts payable	1,834		653
Contract liabilities	(48)		(30)
Income taxes	113		55
Qualified defined benefit pension plans	(322)		(200)
Other, net	794		354
Net cash provided by operating activities	5,874		4,953
Investing activities
Capital expenditures	(977)		(915)
Other, net	(4)		296
Net cash used for investing activities	(981)		(619)
Financing activities
Issuance of long-term debt, net of related costs	2,267		—
Repayments of long-term debt	(2,250)		(500)
Repurchases of common stock	(3,694)		(2,000)
Dividends paid	(2,250)		(2,178)
Other, net	(140)		(89)
Net cash used for financing activities	(6,067)		(4,767)
Net change in cash and cash equivalents	(1,174)		(433)
Cash and cash equivalents at beginning of period	3,604		3,160
Cash and cash equivalents at end of period	$	2,430	$	2,727

The accompanying notes are an integral part of these unaudited consolidated financial statements.

6

Lockheed Martin Corporation

Consolidated Statements of Equity

For the Quarters Ended September 25, 2022 and September 26, 2021

(unaudited; in millions)

	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests in Subsidiary		Total Equity
Balance at June 26, 2022	$	264	$	—	$	19,336	$	(8,168)	$	11,432	$	—	$	11,432
Net earnings	—		—		1,778		—		1,778		—		1,778
Other comprehensive income,   net of tax	—		—		—		34		34		—		34
Dividends declared	—		—		7		—		7		—		7
Repurchases of common stock	(3)		(148)		(1,282)		—		(1,433)		—		(1,433)
Stock-based awards, ESOP   activity and other	—		148		—		—		148		—		148
Balance at September 25, 2022	$	261	$	—	$	19,839	$	(8,134)	$	11,966	$	—	$	11,966
Balance at June 27, 2021	$	276	$	122	$	21,961	$	(15,837)	$	6,522	$	8	$	6,530
Net earnings	—		—		614		—		614		—		614
Other comprehensive income,   net of tax	—		—		—		3,620		3,620		—		3,620
Dividends declared	—		—		(775)		—		(775)		—		(775)
Repurchases of common stock	(2)		(174)		(324)		—		(500)		—		(500)
Stock-based awards, ESOP   activity and other	—		150		—		—		150		—		150
Net decrease in noncontrolling   interests in subsidiary	—		—		—		—		—		(8)		(8)
Balance at September 26, 2021	$	274	$	98	$	21,476	$	(12,217)	$	9,631	$	—	$	9,631

The accompanying notes are an integral part of these unaudited consolidated financial statements.

7

Lockheed Martin Corporation

Consolidated Statements of Equity

For the Nine Months Ended September 25, 2022 and September 26, 2021

(unaudited; in millions)

	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests in Subsidiary		Total Equity
Balance at December 31, 2021	$	271	$	94	$	21,600	$	(11,006)	$	10,959	$	—	$	10,959
Net earnings	—		—		3,820		—		3,820		—		3,820
Other comprehensive income, net of tax	—		—		—		2,872		2,872		—		2,872
Dividends declared	—		—		(2,239)		—		(2,239)		—		(2,239)
Repurchases of common stock	(11)		(453)		(3,342)		—		(3,806)		—		(3,806)
Stock-based awards, ESOP activity and other	1		359		—		—		360		—		360
Balance at September 25, 2022	$	261	$	—	$	19,839	$	(8,134)	$	11,966	$	—	$	11,966
Balance at December 31, 2020	$	279	$	221	$	21,636	$	(16,121)	$	6,015	$	23	$	6,038
Net earnings	—		—		4,266		—		4,266		—		4,266
Other comprehensive income, net of tax	—		—		—		3,904		3,904		—		3,904
Dividends declared	—		—		(2,954)		—		(2,954)		—		(2,954)
Repurchases of common stock	(6)		(522)		(1,472)		—		(2,000)		—		(2,000)
Stock-based awards, ESOP activity and other	1		399		—		—		400		—		400
Net decrease in noncontrolling interests in subsidiary	—		—		—		—		—		(23)		(23)
Balance at September 26, 2021	$	274	$	98	$	21,476	$	(12,217)	$	9,631	$	—	$	9,631

The accompanying notes are an integral part of these unaudited consolidated financial statements.

8

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited)

NOTE 1 - BASIS OF PRESENTATION

We prepared these consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission (SEC) Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.

In the opinion of management, these consolidated financial statements reflect all adjustments that are of a normal recurring nature necessary for a fair presentation of our results of operations, financial condition, and cash flows for the interim periods presented. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates. Significant estimates inherent in the preparation of our consolidated financial statements include, but are not limited to, accounting for sales and cost recognition; postretirement benefit plans; environmental liabilities and assets for the portion of environmental costs that are probable of future recovery; evaluation of goodwill, intangible assets, investments and other assets for impairment; income taxes including deferred tax assets; fair value measurements; and contingencies. The consolidated financial statements include the accounts of subsidiaries we control and variable interest entities if we are the primary beneficiary. We eliminate intercompany balances and transactions in consolidation.

We close our books and records on the last Sunday of the interim calendar quarter, which was on September 25, for the third quarter of 2022 and September 26, for the third quarter of 2021, to align our financial closing with our business processes. The consolidated financial statements and tables of financial information included herein are labeled based on that convention. This practice only affects interim periods as our fiscal year ends on December 31.

The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the full year or future periods. Unless otherwise noted, we present all per share amounts cited in these consolidated financial statements on a “per diluted share” basis. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Form 10-K).

NOTE 2 - EARNINGS PER COMMON SHARE

The weighted average number of shares outstanding used to compute earnings per common share were as follows (in millions):

	Quarters Ended		Nine Months Ended
	September 25, 2022	September 26, 2021	September 25, 2022	September 26, 2021
Weighted average common shares outstanding for basic computations	264.1	276.2	266.0	277.5
Weighted average dilutive effect of equity awards	1.0	1.1	0.9	1.0
Weighted average common shares outstanding for diluted computations	265.1	277.3	266.9	278.5

We compute basic and diluted earnings per common share by dividing net earnings by the respective weighted average number of common shares outstanding for the periods presented. Our calculation of diluted earnings per common share also includes the dilutive effects for the assumed vesting of outstanding restricted stock units (RSUs) and performance stock units (PSUs) based on the treasury stock method. There were no significant anti-dilutive equity awards during the quarters and nine months ended September 25, 2022 and September 26, 2021. Basic and diluted weighted average common shares outstanding decreased in 2022 compared to 2021 due to share repurchases. See “Note 9 - Stockholders’ Equity” for more information.

9

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

NOTE 3 - INFORMATION ON BUSINESS SEGMENTS

Overview

We operate in four business segments: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. We organize our business segments based on the nature of products and services offered.

Selected Financial Data by Business Segment

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 not included in management’s evaluation of performance of each segment. Business segment operating profit includes our share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of our business segments.

Summary Operating Results

Summary operating results for each of our business segments were as follows (in millions):

	Quarters Ended				Nine Months Ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
Net sales
Aeronautics	$	7,089	$	6,568	$	19,352	$	19,621
Missiles and Fire Control	2,831		2,781		8,030		8,474
Rotary and Mission Systems	3,781		3,980		11,345		12,329
Space	2,882		2,699		8,266		8,891
Total net sales	$	16,583	$	16,028	$	46,993	$	49,315
Operating profit
Aeronautics	$	759	$	714	$	2,050	$	1,979
Missiles and Fire Control	382		413		1,184		1,210
Rotary and Mission Systems	414		459		1,165		1,350
Space	301		264		814		826
Total business segment operating profit	1,856		1,850		5,213		5,365
Unallocated items
FAS/CAS pension operating adjustment	430		491		1,281		1,469
Severance and restructuring charges	—		—		—		(36)
Other, net	(127)		(47)		(439)		(130)
Total unallocated items	303		444		842		1,303
Total consolidated operating profit	$	2,159	$	2,294	$	6,055	$	6,668
Intersegment sales
Aeronautics	$	63	$	60	$	181	$	165
Missiles and Fire Control	146		153		463		449
Rotary and Mission Systems	503		455		1,411		1,381
Space	102		95		284		269
Total intersegment sales	$	814	$	763	$	2,339	$	2,264
Amortization of purchased intangibles
Aeronautics	$	—	$	—	$	(1)	$	(1)
Missiles and Fire Control	(1)		(1)		(2)		(2)
Rotary and Mission Systems	(58)		(58)		(174)		(174)
Space	(3)		(2)		(9)		(46)
Total amortization of purchased intangibles	$	(62)	$	(61)	$	(186)	$	(223)

10

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Unallocated Items

Business segment operating profit excludes the FAS/CAS pension operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, changes in the fair value of strategic investments in companies made by our Lockheed Martin Ventures Fund, stock-based compensation expense, changes in the fair value of investments held in a trust for deferred compensation plans, retiree benefits, significant severance actions, significant asset impairments, gains or losses from divestitures, and other miscellaneous corporate activities. Excluded items are included in the reconciling item “Unallocated items” between operating profit from our business segments and our consolidated operating profit. See “Note 10 - Other” for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments.

FAS/CAS Pension Operating Adjustment

We recover CAS pension and other postretirement benefit plan cost through the pricing of our products and services on U.S. Government contracts and, therefore, recognize CAS pension cost in each of our business segment’s net sales and cost of sales. Our consolidated financial statements must present pension and other postretirement benefit plan income calculated in accordance with FAS requirements under U.S. GAAP. The operating portion of the total FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension income (expense) and total CAS pension cost. The non-service FAS pension income (expense) components are included in non-service FAS pension income (expense) in our consolidated statements of earnings. As a result, to the extent that CAS pension cost exceeds the service cost component of FAS pension income (expense), we have a favorable FAS/CAS pension operating adjustment.

The total FAS/CAS pension adjustment for the quarters and nine months ended September 25, 2022 and September 26, 2021, including the service and non-service cost components of FAS pension income (expense) for our qualified defined benefit pension plans, were as follows (in millions):

	Quarters Ended				Nine Months Ended
	September 25, 2022		September 26, 2021		September 25, 2022			September 26, 2021
Total FAS income (expense) and CAS cost
FAS pension income (expense)	$	91	$	(1,598)		$	(1,148)	$	(1,465)
Less: CAS pension cost	450		517			1,349		1,549
Total FAS/CAS pension adjustment	$	541	$	(1,081)		$	201	$	84
Service and non-service cost reconciliation
FAS pension service cost	$	(20)	$	(26)		$	(68)	$	(80)
Less: CAS pension cost	450		517			1,349		1,549
Total FAS/CAS pension operating adjustment