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 June 25, 2023

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 251,831,462 shares of our common stock, $1 par value per share, outstanding as of July 14, 2023.

Lockheed Martin Corporation

Form 10-Q

For the Quarterly Period Ended June 25, 2023

Table of Contents

			Page
PART I. FINANCIAL INFORMATION
	ITEM 1.	Financial Statements (Unaudited)
		Consolidated Statements of Earnings for the Quarters and Six Months Ended June 25, 2023 and June 26, 2022	3
		Consolidated Statements of Comprehensive Income for the Quarters and Six Months Ended June 25, 2023 and June 26, 2022	4
		Consolidated Balance Sheets as of June 25, 2023 and December 31, 2022	5
		Consolidated Statements of Cash Flows for the Six Months Ended June 25, 2023 and June 26, 2022	6
		Consolidated Statements of Equity for the Quarters Ended June 25, 2023 and June 26, 2022	7
		Consolidated Statements of Equity for the Six Months Ended June 25, 2023 and June 26, 2022	8
		Notes to Consolidated Financial Statements	9
		Report of Independent Registered Public Accounting Firm	26
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	43
	ITEM 4.	Controls and Procedures	43
PART II. OTHER INFORMATION
	ITEM 1.	Legal Proceedings	44
	ITEM 1A.	Risk Factors	45
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
	ITEM 6.	Exhibits	47
SIGNATURE			48

PART I. 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 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
Net sales
Products	$	13,758	$	12,761	$	26,284	$	25,255
Services	2,935		2,685		5,535		5,155
Total net sales	16,693		15,446		31,819		30,410
Cost of sales
Products	(12,238)		(11,339)		(23,389)		(22,446)
Services	(2,642)		(2,356)		(4,926)		(4,523)
Other unallocated, net	277		205		632		424
Total cost of sales	(14,603)		(13,490)		(27,683)		(26,545)
Gross profit	2,090		1,956		4,136		3,865
Other income, net	45		7		36		31
Operating profit	2,135		1,963		4,172		3,896
Interest expense	(223)		(141)		(425)		(276)
Non-service FAS pension income (expense)	111		(1,331)		221		(1,191)
Other non-operating (expense) income, net	(17)		(161)		32		(38)
Earnings before income taxes	2,006		330		4,000		2,391
Income tax expense	(325)		(21)		(630)		(349)
Net earnings	$	1,681	$	309	$	3,370	$	2,042
Earnings per common share
Basic	$	6.65	$	1.16	$	13.28	$	7.65
Diluted	$	6.63	$	1.16	$	13.24	$	7.62
Cash dividends paid per common share	$	3.00	$	2.80	$	6.00	$	5.60

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				Six Months Ended
	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
Net earnings	$	1,681	$	309	$	3,370	$	2,042
Other comprehensive income, net of tax
Postretirement benefit plans
Net actuarial gain recognized due to plan remeasurements, net of tax of $461 million in 2022	—		1,698		—		1,698
Amortization of actuarial losses and prior service credits, net of tax of $10 million and $20 million in 2023 and $15 million and $28 million in 2022	(37)		47		(74)		95
Pension settlement charge, net of tax of $314 million in 2022	—		1,156		—		1,156
Other, net, net of tax of $4 million and $8 million in 2023 and $6 million and $5 million in 2022	44		(90)		18		(111)
Other comprehensive income (loss), net of tax	7		2,811		(56)		2,838
Comprehensive income	$	1,688	$	3,120	$	3,314	$	4,880

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)

	June 25, 2023		December 31, 2022
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	3,673	$	2,547
Receivables, net	3,427		2,505
Contract assets	13,008		12,318
Inventories	3,498		3,088
Other current assets	481		533
Total current assets	24,087		20,991
Property, plant and equipment, net	7,966		7,975
Goodwill	10,795		10,780
Intangible assets, net	2,336		2,459
Deferred income taxes	4,518		3,744
Other noncurrent assets	7,276		6,931
Total assets	$	56,978	$	52,880
Liabilities and equity
Current liabilities
Accounts payable	$	3,466	$	2,117
Salaries, benefits and payroll taxes	2,896		3,075
Contract liabilities	8,184		8,488
Current maturities of long-term debt	283		118
Other current liabilities	2,875		2,089
Total current liabilities	17,704		15,887
Long-term debt, net	17,262		15,429
Accrued pension liabilities	5,373		5,472
Other noncurrent liabilities	7,399		6,826
Total liabilities	47,738		43,614
Stockholders’ equity
Common stock, $1 par value per share	251		254
Additional paid-in capital	—		92
Retained earnings	17,068		16,943
Accumulated other comprehensive loss	(8,079)		(8,023)
Total stockholders’ equity	9,240		9,266
Total liabilities and equity	$	56,978	$	52,880

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)

	Six Months Ended
	June 25, 2023		June 26, 2022
Operating activities
Net earnings	$	3,370	$	2,042
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	659		672
Stock-based compensation	146		134
Deferred income taxes	(234)		(425)
Pension settlement charge	—		1,470
Changes in assets and liabilities
Receivables, net	(922)		(1,438)
Contract assets	(690)		(1,174)
Inventories	(410)		(450)
Accounts payable	1,397		1,522
Contract liabilities	(304)		(30)
Income taxes	(46)		318
Qualified defined benefit pension plans	(189)		(231)
Other, net	(113)		331
Net cash provided by operating activities	2,664		2,741
Investing activities
Capital expenditures	(623)		(572)
Other, net	30		(11)
Net cash used for investing activities	(593)		(583)
Financing activities
Issuance of long-term debt, net of related costs	1,975		2,267
Repayments of long-term debt	—		(2,250)
Repurchases of common stock	(1,250)		(2,356)
Dividends paid	(1,542)		(1,511)
Other, net	(128)		(137)
Net cash used for financing activities	(945)		(3,987)
Net change in cash and cash equivalents	1,126		(1,829)
Cash and cash equivalents at beginning of period	2,547		3,604
Cash and cash equivalents at end of period	$	3,673	$	1,775

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 June 25, 2023 and June 26, 2022

(unaudited; in millions)

	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity
Balance at March 26, 2023	$	254	$	—	$	17,478	$	(8,086)	$	9,646
Net earnings	—		—		1,681		—		1,681
Other comprehensive income, net of tax	—		—		—		7		7
Dividends declared	—		—		(1,523)		—		(1,523)
Repurchases of common stock	(3)		(179)		(568)		—		(750)
Stock-based awards, ESOP activity and other	—		179		—		—		179
Balance at June 25, 2023	$	251	$	—	$	17,068	$	(8,079)	$	9,240
Balance at March 27, 2022	$	265	$	—	$	20,716	$	(10,979)	$	10,002
Net earnings	—		—		309		—		309
Other comprehensive income, net of tax	—		—		—		2,811		2,811
Dividends declared	—		—		(1,497)		—		(1,497)
Repurchases of common stock	(2)		(179)		(192)		—		(373)
Stock-based awards, ESOP activity and other	1		179		—		—		180
Balance at June 26, 2022	$	264	$	—	$	19,336	$	(8,168)	$	11,432

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

7

Lockheed Martin Corporation

Consolidated Statements of Equity

For the Six Months Ended June 25, 2023 and June 26, 2022

(unaudited; in millions)

	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity
Balance at December 31, 2022	$	254	$	92	$	16,943	$	(8,023)	$	9,266
Net earnings	—		—		3,370		—		3,370
Other comprehensive income, net of tax	—		—		—		(56)		(56)
Dividends declared	—		—		(2,291)		—		(2,291)
Repurchases of common stock	(4)		(292)		(954)		—		(1,250)
Stock-based awards, ESOP activity and other	1		200		—		—		201
Balance at June 25, 2023	$	251	$	—	$	17,068	$	(8,079)	$	9,240
Balance at December 31, 2021	$	271	$	94	$	21,600	$	(11,006)	$	10,959
Net earnings	—		—		2,042		—		2,042
Other comprehensive income, net of tax	—		—		—		2,838		2,838
Dividends declared	—		—		(2,246)		—		(2,246)
Repurchases of common stock	(8)		(305)		(2,060)		—		(2,373)
Stock-based awards, ESOP activity and other	1		211		—		—		212
Balance at June 26, 2022	$	264	$	—	$	19,336	$	(8,168)	$	11,432

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.

Effective January 1, 2023, we no longer consider amortization expense related to purchased intangible assets when evaluating the operating performance of our business segments. As a result, intangible asset amortization expense, which was previously included in segment operating profit, is now reported in unallocated corporate expense within total consolidated operating profit. This change has no impact on our consolidated operating results. Management believes this updated presentation better aligns with how the business is viewed and managed and will provide better insights into business segment performance. This change has been applied to the amounts in this Form 10-Q, including amounts for 2022. See “Note 3 - Information on Business Segments” for further information regarding the impact of this change on our current and prior period segment operating profit.

Additionally, during the third quarter of 2022, we changed the presentation of deferred income taxes related to uncertain tax positions in the operating cash flow section of the consolidated statements of cash flows. Amounts for six months ended June 26, 2022 have been conformed to the current period’s presentation and this change does not impact previously reported net cash from operating activities.

We close our books and records on the last Sunday of the interim calendar quarter, which was on June 25 for the second quarter of 2023 and June 26 for the second quarter of 2022 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, 2022 (2022 Form 10-K).

9

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

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		Six Months Ended
	June 25, 2023	June 26, 2022	June 25, 2023	June 26, 2022
Weighted average common shares outstanding for basic computations	252.8	265.8	253.7	267.0
Weighted average dilutive effect of equity awards	0.8	0.9	0.9	0.9
Weighted average common shares outstanding for diluted computations	253.6	266.7	254.6	267.9

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 six months ended June 25, 2023 and June 26, 2022. Basic and diluted weighted average common shares outstanding decreased in 2023 compared to 2022 due to share repurchases. See “Note 9 - Stockholders’ Equity” for more information.

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 thus are 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

As discussed in “Note 1 - Basis of Presentation”, effective January 1, 2023, we no longer consider amortization expense related to purchased intangible assets when evaluating the operating performance of our business segments. As a result, intangible asset amortization expense, which was previously included in segment operating profit, is now reported in unallocated items within total consolidated operating profit.

10

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

This change has been applied to the amounts below, including the amounts for 2022. Sales and operating profit for each of our business segments were as follows (in millions):

	Quarters Ended				Six Months Ended
	June 25, 2023		June 26, 2022		June 25, 2023		June 26, 2022
Net sales
Aeronautics	$	6,875	$	5,862	$	13,144	$	12,263
Missiles and Fire Control	2,755		2,747		5,143		5,199
Rotary and Mission Systems	3,897		4,012		7,407		7,564
Space	3,166		2,825		6,125		5,384
Total net sales	$	16,693	$	15,446	$	31,819	$	30,410
Operating profit
Aeronautics	$	718	$	613	$	1,393	$	1,292
Missiles and Fire Control	371		418		748		803
Rotary and Mission Systems	454		461		804		867
Space	312		271		592		519
Total business segment operating profit	1,855		1,763		3,537		3,481
Unallocated items
FAS/CAS pension operating adjustment	416		425		831		851
Intangible asset amortization expense	(62)		(62)		(124)		(124)
Other, net	(74)		(163)		(72)		(312)
Total unallocated items	280		200		635		415
Total consolidated operating profit	$	2,135	$	1,963	$	4,172	$	3,896
Intersegment sales
Aeronautics	$	71	$	58	$	124	$	118
Missiles and Fire Control	159		161		305		317
Rotary and Mission Systems	505		453		994		908
Space	92		99		178		182
Total intersegment sales	$	827	$	771	$	1,601	$	1,525

Unallocated Items

Business segment operating profit excludes the FAS/CAS pension operating adjustment, 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, stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, retiree benefits, significant severance charges, significant asset impairments, gains or losses from divestitures, intangible asset amortization expense, 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

Our business segments’ results of operations include pension expense only as calculated under U.S. Government Cost Accounting Standards (CAS), which we refer to as CAS pension cost. 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 Financial Accounting Standards (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. 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.

11

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Disaggregation of Net Sales

Net sales by products and services, contract type, customer, and geographic region were as follows (in millions):

	Quarter Ended June 25, 2023
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	5,645	$	2,412	$	3,041	$	2,660	$	13,758
Services	1,230		343		856		506		2,935
Total net sales	$	6,875	$	2,755	$	3,897	$	3,166	$	16,693
Net sales by contract type
Fixed-price	$	4,656	$	1,863	$	2,451	$	799	$	9,769
Cost-reimbursable	2,219		892		1,446		2,367		6,924
Total net sales	$	6,875	$	2,755	$	3,897	$	3,166	$	16,693
Net sales by customer
U.S. Government	$	4,621	$	1,911	$	2,754	$	3,121	$	12,407
International (a)	2,169		841		1,075		41		4,126
U.S. commercial and other	85		3		68		4		160
Total net sales	$	6,875	$	2,755	$	3,897	$	3,166	$	16,693
Net sales by geographic region
United States	$	4,706	$	1,914	$	2,822	$	3,125	$	12,567
Europe	1,146		174		212		24		1,556
Asia Pacific	690		215		554		16		1,475
Middle East	226		411		155		1		793
Other	107		41		154		—		302
Total net sales	$	6,875	$	2,755	$	3,897	$	3,166	$	16,693

	Six Months Ended June 25, 2023
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	10,801	$	4,501	$	5,833	$	5,149	$	26,284
Services	2,343		642		1,574		976		5,535
Total net sales	$	13,144	$	5,143	$	7,407	$	6,125	$	31,819
Net sales by contract type
Fixed-price	$	8,968	$	3,481	$	4,659	$	1,563	$	18,671
Cost-reimbursable	4,176		1,662		2,748		4,562		13,148
Total net sales	$	13,144	$	5,143	$	7,407	$	6,125	$	31,819
Net sales by customer
U.S. Government	$	8,738	$	3,492	$	5,177	$	6,029	$	23,436
International (a)	4,283		1,646		2,095		86		8,110
U.S. commercial and other	123		5		135		10		273
Total net sales	$	13,144	$	5,143	$	7,407	$	6,125	$	31,819
Net sales by geographic region
United States	$	8,861	$	3,497	$	5,312	$	6,039	$	23,709
Europe	2,276		385		437		47		3,145
Asia Pacific	1,365		317		992		38		2,712
Middle East	451		866		341		1		1,659
Other	191		78		325		—		594
Total net sales	$	13,144	$	5,143	$	7,407	$	6,125	$	31,819

12

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

	Quarter Ended June 26, 2022
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	4,804	$	2,444	$	3,150	$	2,363	$	12,761
Services	1,058		303		862		462		2,685
Total net sales	$	5,862	$	2,747	$	4,012	$	2,825	$	15,446
Net sales by contract type
Fixed-price	$	3,916	$	1,943	$	2,589	$	753	$	9,201
Cost-reimbursable	1,946		804		1,423		2,072		6,245
Total net sales	$	5,862	$	2,747	$	4,012	$	2,825	$	15,446
Net sales by customer
U.S. Government	$	3,963	$	1,924	$	2,785	$	2,786	$	11,458
International (a)	1,868		823		1,129		29		3,849
U.S. commercial and other	31		—		98		10		139
Total net sales	$	5,862	$	2,747	$	4,012	$	2,825	$	15,446
Net sales by geographic region
United States	$	3,994	$	1,924	$	2,883	$	2,796	$	11,597
Europe	845		262		178		20		1,305
Asia Pacific	705		107		553		6		1,371
Middle East	222		417		201		3		843
Other	96		37		197		—		330
Total net sales	$	5,862	$	2,747	$	4,012	$	2,825	$	15,446

	Six Months Ended June 26, 2022
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	10,221	$	4,617	$	5,938	$	4,479	$	25,255
Services	2,042		582		1,626		905		5,155
Total net sales	$	12,263	$	5,199	$	7,564	$	5,384	$	30,410
Net sales by contract type
Fixed-price	$	8,602	$	3,656	$	4,807	$	1,390	$	18,455
Cost-reimbursable	3,661		1,543		2,757		3,994		11,955
Total net sales	$	12,263	$	5,199	$	7,564	$	5,384	$	30,410
Net sales by customer
U.S. Government	$	8,176	$	3,519	$	5,296	$	5,302	$	22,293
International (a)	4,018		1,675		2,100		63		7,856
U.S. commercial and other	69		5		168		19		261
Total net sales	$	12,263	$	5,199	$	7,564	$	5,384	$	30,410
Net sales by geographic region
United States	$	8,245	$	3,524	$	5,464	$	5,321	$	22,554
Europe	1,868		518		365		44		2,795
Asia Pacific	1,426		213		985		13		2,637
Middle East	484		882		377		6		1,749
Other	240		62		373		—		675
Total net sales	$	12,263	$	5,199	$	7,564	$	5,384	$	30,410

(a)International sales include foreign military sales (FMS) contracted through the U.S. Government and direct commercial sales to international governments and other international customers.

13

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Our Aeronautics business segment includes our largest program, the F-35 Lightning II, an international multi-role, multi-variant, stealth fighter aircraft. Net sales for the F-35 program represented approximately 26% of our total consolidated net sales for both the quarter and six months ended June 25, 2023 and 23% and 26% of our total consolidated net sales for the quarter and six months ended June 26, 2022.

Assets

Total assets for each of our business segments were as follows (in millions):

	June 25, 2023		December 31, 2022
Assets
Aeronautics	$	13,426	$	12,055
Missiles and Fire Control	5,777		5,788
Rotary and Mission Systems	18,175		17,988
Space	6,640		6,351
Total business segment assets	44,018		42,182
Corporate assets (a)	12,960		10,698
Total assets	$	56,978	$	52,880

(a)Corporate assets primarily include cash and cash equivalents, deferred income taxes, assets for the portion of environmental costs that are probable of future recovery, property, plant and equipment used in our corporate operations, assets held in a trust for deferred compensation plans, and other marketable investments.

NOTE 4 - CONTRACT ASSETS AND LIABILITIES

Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. Contract liabilities include advance payments and billings in excess of revenue recognized. Contract assets and contract liabilities were as follows (in millions):

	June 25, 2023		December 31, 2022
Contract assets	$	13,008	$	12,318
Contract liabilities	8,184		8,488

Contract assets increased $690 million during the six months ended June 25, 2023, due to the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations during the six months ended June 25, 2023 for which we have not yet billed our customers (primarily on the F-35 program at Aeronautics). There were no significant credit or impairment losses related to our contract assets during the quarters and six months ended June 25, 2023 and June 26, 2022.

Contract liabilities decreased $304 million during the six months ended June 25, 2023, primarily due to revenue recognized in excess of payments received on these performance obligations. During the quarter and six months ended June 25, 2023, we recognized $1.1 billion and $3.3 billion of our contract liabilities at December 31, 2022 as revenue. During the quarter and six months ended June 26, 2022, we recognized $1.4 billion and $3.5 billion of our contract liabilities at December 31, 2021 as revenue.

14

Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

NOTE 5 - INVENTORIES

Inventories consisted of the following (in millions):

	June 25, 2023		December 31, 2022
Materials, spares and supplies	$	599	<