Quarters Ended Six Months Ended
June 28,
2020 June 30,
2019 June 28,
2020 June 30,
2019
Net sales
Products $ 13,572 $ 12,003 $ 26,738 $ 23,973
Services 2,648 2,424 5,133 4,790
Total net sales 16,220 14,427 31,871 28,763
Cost of sales
Products (12,092) (10,674) (23,834) (21,299)
Services (2,339) (2,194) (4,552) (4,241)
Other unallocated, net 424 434 819 958
Total cost of sales (14,007) (12,434) (27,567) (24,582)
Gross profit 2,213 1,993 4,304 4,181
Other (expense) income, net (127) 15 (96) 110
Operating profit 2,086 2,008 4,208 4,291
Interest expense (149) (163) (297) (334)
Other non-operating income (expense), net 25 (162) 81 (329)
Earnings before income taxes 1,962 1,683 3,992 3,628
Income tax expense (336) (263) (649) (504)
Net earnings $ 1,626 $ 1,420 $ 3,343 $ 3,124
Earnings per common share
Basic $ 5.81 $ 5.03 $ 11.92 $ 11.07
Diluted $ 5.79 $ 5.00 $ 11.87 $ 11.00
Cash dividends paid per common share $ 2.40 $ 2.20 $ 4.80 $ 4.40



	Quarters Ended				Six Months Ended
	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020
Net sales
Products	$	14,258	$	13,572	$	28,011	$	26,738
Services	2,771		2,648		5,276		5,133
Total net sales	17,029		16,220		33,287		31,871
Cost of sales
Products	(12,866)		(12,092)		(25,147)		(23,834)
Services	(2,438)		(2,339)		(4,668)		(4,552)
Severance and restructuring charges	0		0		(36)		0
Other unallocated, net	426		424		901		819
Total cost of sales	(14,878)		(14,007)		(28,950)		(27,567)
Gross profit	2,151		2,213		4,337		4,304
Other income (expense), net	41		(127)		37		(96)
Operating profit	2,192		2,086		4,374		4,208
Interest expense	(142)		(149)		(282)		(297)
Other non-operating income, net	120		25		289		81
Earnings before income taxes	2,170		1,962		4,381		3,992
Income tax expense	(355)		(336)		(729)		(649)


Net earnings	$	1,815	$	1,626	$	3,652	$	3,343

Earnings per common share
Basic	$	6.54	$	5.81	$	13.13	$	11.92



Diluted	$	6.52	$	5.79	$	13.08	$	11.87




Cash dividends paid per common share	$	2.60	$	2.40	$	5.20	$	4.80

Quarters Ended Six Months Ended
June 28,
2020 June 30,
2019 June 28,
2020 June 30,
2019
Net earnings $ 1,626 $ 1,420 $ 3,343 $ 3,124
Other comprehensive income, net of tax
Recognition of previously deferred postretirement benefit
plan amounts 110 227 220 454
Other, net 28 28 (69) 28
Other comprehensive income, net of tax 138 255 151 482
Comprehensive income $ 1,764 $ 1,675 $ 3,494 $ 3,606



	Quarters Ended				Six Months Ended
	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020
Net earnings	$	1,815	$	1,626	$	3,652	$	3,343
Other comprehensive income, net of tax
Recognition of previously deferred postretirement benefit plan amounts	140		110		280		220
Other, net	31		28		4		(69)
Other comprehensive income, net of tax	171		138		284		151
Comprehensive income	$	1,986	$	1,764	$	3,936	$	3,494

June 28,
2020 December 31,
2019
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 2,855 $ 1,514
Receivables, net 2,835 2,337
Contract assets 9,821 9,094
Inventories 3,521 3,619
Other current assets 538 531
Total current assets 19,570 17,095
Property, plant and equipment, net 6,663 6,591
Goodwill 10,579 10,604
Intangible assets, net 3,077 3,213
Deferred income taxes 3,127 3,319
Other noncurrent assets 6,587 6,706
Total assets $ 49,603 $ 47,528
Liabilities and equity
Current liabilities
Accounts payable $ 1,453 $ 1,281
Contract liabilities 7,481 7,054
Salaries, benefits and payroll taxes 2,488 2,466
Current maturities of long-term debt 500 1,250
Other current liabilities 2,966 1,921
Total current liabilities 14,888 13,972
Long-term debt, net 12,174 11,404
Accrued pension liabilities 12,921 13,234
Other noncurrent liabilities 5,834 5,747
Total liabilities 45,817 44,357
Stockholders’ equity
Common stock, $1 par value per share 278 280
Additional paid-in capital — —
Retained earnings 18,876 18,401
Accumulated other comprehensive loss (15,403) (15,554)
Total stockholders’ equity 3,751 3,127
Noncontrolling interests in subsidiary 35 44
Total equity 3,786 3,171
Total liabilities and equity $ 49,603 $ 47,528


	June 27, 2021		December 31, 2020
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	2,745	$	3,160
Receivables, net	2,611		1,978
Contract assets	11,425		9,545
Inventories	3,119		3,545
Other current assets	774		1,150
Total current assets	20,674		19,378
Property, plant and equipment, net	7,290		7,213
Goodwill	10,810		10,806
Intangible assets, net	2,849		3,012
Deferred income taxes	3,377		3,475
Other noncurrent assets	7,099		6,826
Total assets	$	52,099	$	50,710
Liabilities and equity
Current liabilities
Accounts payable	$	1,608	$	880
Contract liabilities	7,379		7,545
Salaries, benefits and payroll taxes	3,029		3,163
Current maturities of long-term debt	506		500
Other current liabilities	2,720		1,845
Total current liabilities	15,242		13,933
Long-term debt, net	11,665		11,669
Accrued pension liabilities	12,412		12,874
Other noncurrent liabilities	6,250		6,196
Total liabilities	45,569		44,672
Stockholders’ equity
Common stock, $1 par value per share	276		279
Additional paid-in capital	122		221
Retained earnings	21,961		21,636
Accumulated other comprehensive loss	(15,837)		(16,121)
Total stockholders’ equity	6,522		6,015
Noncontrolling interests in subsidiary	8		23
Total equity	6,530		6,038
Total liabilities and equity	$	52,099	$	50,710

Six Months Ended
June 28,
2020 June 30,
2019
Operating activities
Net earnings $ 3,343 $ 3,124
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization 608 565
Stock-based compensation 115 104
Equity method investment impairment 128 —
Gain on property sale — (51)
Changes in assets and liabilities
Receivables, net (498) (102)
Contract assets (727) (916)
Inventories 98 (602)
Accounts payable 191 237
Contract liabilities 427 275
Postretirement benefit plans (77) 552
Income taxes 473 112
Other, net 415 33
Net cash provided by operating activities 4,496 3,331
Investing activities
Capital expenditures (636) (533)
Other, net 4 25
Net cash used for investing activities (632) (508)
Financing activities
Dividends paid (1,364) (1,260)
Repurchases of common stock (1,015) (500)
Issuance of long-term debt, net of related costs 1,131 —
Repayments of current and long-term debt (1,150) —
Repayments of commercial paper, net — (600)
Other, net (125) (68)
Net cash used for financing activities (2,523) (2,428)
Net change in cash and cash equivalents 1,341 395
Cash and cash equivalents at beginning of period 1,514 772
Cash and cash equivalents at end of period $ 2,855 $ 1,167


	Six Months Ended
	June 27, 2021		June 28, 2020
Operating activities
Net earnings	$	3,652	$	3,343
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	670		608
Stock-based compensation	127		115
Equity method investment impairment	0		128


Severance and restructuring charges	36		0

Changes in assets and liabilities
Receivables, net	(633)		(498)
Contract assets	(1,880)		(727)
Inventories	426		98
Accounts payable	743		191
Contract liabilities	(166)		427
Postretirement benefit plans	(133)		(77)
Income taxes	33		473
Other, net	141		415
Net cash provided by operating activities	3,016		4,496
Investing activities
Capital expenditures	(599)		(636)
Other, net	210		4
Net cash used for investing activities	(389)		(632)
Financing activities
Dividends paid	(1,460)		(1,364)
Repurchases of common stock	(1,500)		(1,015)
Issuance of long-term debt, net of related costs	0		1,131
Repayments of current and long-term debt	0		(1,150)

Other, net	(82)		(125)
Net cash used for financing activities	(3,042)		(2,523)
Net change in cash and cash equivalents	(415)		1,341
Cash and cash equivalents at beginning of period	3,160		1,514
Cash and cash equivalents at end of period	$	2,745	$	2,855

Common
Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Total
Stockholders’
Equity Noncontrolling
Interests in
Subsidiary Total
Equity
Balance at March 29, 2020 $ 279 $ — $ 18,708 $ (15,541) $ 3,446 $ 41 $ 3,487
Net earnings — — 1,626 — 1,626 — 1,626
Other comprehensive income, net of tax — — — 138 138 — 138
Repurchases of common stock (1) (168) (108) — (277) — (277)
Dividends declared — — (1,350) — (1,350) — (1,350)
Stock-based awards, ESOP activity and other — 168 — — 168 — 168
Net decrease in noncontrolling interests in subsidiary — — — — — (6) (6)
Balance at June 28, 2020 $ 278 $ — $ 18,876 $ (15,403) $ 3,751 $ 35 $ 3,786
Balance at March 31, 2019 $ 281 $ — $ 16,278 $ (14,094) $ 2,465 $ 57 $ 2,522
Net earnings — — 1,420 — 1,420 — 1,420
Other comprehensive income, net of tax — — — 255 255 — 255
Repurchases of common stock (1) (174) (41) — (216) — (216)
Dividends declared — — (1,249) — (1,249) — (1,249)
Stock-based awards, ESOP activity and other 1 174 — — 175 — 175
Net decrease in noncontrolling interests in subsidiary — — — — — (11) (11)
Balance at June 30, 2019 $ 281 $ — $ 16,408 $ (13,839) $ 2,850 $ 46 $ 2,896



	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests in Subsidiary		Total Equity
Balance at March 28, 2021	$	278	$	65	$	21,977	$	(16,008)	$	6,312	$	21	$	6,333
Net earnings	—		—		1,815		—		1,815		—		1,815
Other comprehensive income, net of tax	—		—		—		171		171		—		171
Dividends declared	—		—		(1,454)		—		(1,454)		—		(1,454)
Repurchases of common stock	(2)		(121)		(377)		—		(500)		—		(500)
Stock-based awards, ESOP activity and other	—		178		—		—		178		—		178
Net decrease in noncontrolling interests in subsidiary	—		—		—		—		—		(13)		(13)
Balance at June 27, 2021	$	276	$	122	$	21,961	$	(15,837)	$	6,522	$	8	$	6,530

Balance at March 29, 2020	$	279	$	0	$	18,708	$	(15,541)	$	3,446	$	41	$	3,487
Net earnings	—		—		1,626		—		1,626		—		1,626
Other comprehensive income, net of tax	—		—		—		138		138		—		138
Dividends declared	—		—		(1,350)		—		(1,350)		—		(1,350)
Repurchases of common stock	(1)		(168)		(108)		—		(277)		—		(277)
Stock-based awards, ESOP activity and other	—		168		—		—		168		—		168

Net decrease in noncontrolling interests in subsidiary	—		—		—		—		—		(6)		(6)
Balance at June 28, 2020	$	278	$	0	$	18,876	$	(15,403)	$	3,751	$	35	$	3,786

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, 2019 $ 280 $ — $ 18,401 $ (15,554) $ 3,127 $ 44 $ 3,171
Net earnings — — 3,343 — 3,343 — 3,343
Other comprehensive income, net of tax — — — 151 151 — 151
Repurchases of common stock (3) (197) (841) — (1,041) — (1,041)
Dividends declared — — (2,027) — (2,027) — (2,027)
Stock-based awards, ESOP activity and other 1 197 — — 198 — 198
Net decrease in noncontrolling interests in subsidiary — — — — — (9) (9)
Balance at June 28, 2020 $ 278 $ — $ 18,876 $ (15,403) $ 3,751 $ 35 $ 3,786
Balance at December 31, 2018 $ 281 $ — $ 15,434 $ (14,321) $ 1,394 $ 55 $ 1,449
Net earnings — — 3,124 — 3,124 — 3,124
Other comprehensive income, net of tax — — — 482 482 — 482
Repurchases of common stock (2) (220) (278) — (500) — (500)
Dividends declared — — (1,872) — (1,872) — (1,872)
Stock-based awards, ESOP activity and other 2 220 — — 222 — 222
Net decrease in noncontrolling interests in subsidiary — — — — — (9) (9)
Balance at June 30, 2019 $ 281 $ — $ 16,408 $ (13,839) $ 2,850 $ 46 $ 2,896



	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, 2020	$	279	$	221	$	21,636	$	(16,121)	$	6,015	$	23	$	6,038
Net earnings	—		—		3,652		—		3,652		—		3,652
Other comprehensive income, net of tax	—		—		—		284		284		—		284
Dividends declared	—		—		(2,179)		—		(2,179)		—		(2,179)
Repurchases of common stock	(4)		(348)		(1,148)		—		(1,500)		—		(1,500)
Stock-based awards, ESOP activity and other	1		249		—		—		250		—		250
Net decrease in noncontrolling interests in subsidiary	—		—		—		—		—		(15)		(15)
Balance at June 27, 2021	$	276	$	122	$	21,961	$	(15,837)	$	6,522	$	8	$	6,530

Balance at December 31, 2019	$	280	$	0	$	18,401	$	(15,554)	$	3,127	$	44	$	3,171
Net earnings	—		—		3,343		—		3,343		—		3,343
Other comprehensive income, net of tax	—		—		—		151		151		—		151
Dividends declared	—		—		(2,027)		—		(2,027)		—		(2,027)
Repurchases of common stock	(3)		(197)		(841)		—		(1,041)		—		(1,041)
Stock-based awards, ESOP activity and other	1		197		—		—		198		—		198
Net decrease in noncontrolling interests in subsidiary	—		—		—		—		—		(9)		(9)
Balance at June 28, 2020	$	278	$	0	$	18,876	$	(15,403)	$	3,751	$	35	$	3,786

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,~~recognition; postretirement benefit ~~plans,~~plans; environmental liability and assets for the portion of environmental costs that are probable of future ~~recovery and liabilities,~~recovery; evaluation of goodwill, intangible assets, investments and other assets for ~~impairment,~~impairment; income taxes including deferred tax ~~assets,~~assets; fair value ~~measurements~~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 adopted Accounting Standards Update (ASU) 2016-13,~~ ~~Financial Instruments—Credit Losses (Topic 326)~~: ~~Measurement of Credit Losses on Financial Instruments~~, effective January 1, 2020 using the modified retrospective approach. The new standard changes how we account for credit losses for financial assets and certain other instruments, including trade receivables and contract assets, that are not measured at fair value through net income. Under legacy standards, we recognized an impairment of receivables when it was probable that a loss had been incurred. Under the new standard, we are required to recognize estimated credit losses expected to occur over the estimated life or remaining contractual life of an asset (which includes losses that may be incurred in future periods) using a broader range of information including reasonable and supportable forecasts about future economic conditions. The adoption of the standard did not have a significant impact on our results of operations, financial position or cash flows.

~~We adopted ASU 2018-14,~~ ~~Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements For Defined Benefit Plans~~, effective January 1, 2020. The new standard modifies the annual disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The guidance requires disclosure changes to be presented on a retrospective basis. As this standard relates only to financial disclosures, its adoption did not have an impact to our results of operations, financial position or cash flows.

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, ~~2019 (2019~~2020 (2020 Form 10-K).

On December 20, 2020, we entered into an agreement to acquire Aerojet Rocketdyne Holdings, Inc. (“Aerojet Rocketdyne”) for $51.00 per share, which is net of a $5.00 per share special cash dividend Aerojet Rocketdyne paid to its stockholders on March 24, 2021. This represents a post-dividend equity value of approximately $4.6 billion, on a fully diluted as-converted basis, and a transaction value of approximately $4.4 billion after the assumption of Aerojet Rocketdyne’s projected net cash. We expect to finance the acquisition through a combination of cash on hand and new debt issuances. The transaction was approved by Aerojet Rocketdyne’s stockholders on March 9, 2021, which was a closing condition. We are in the process of responding to a request for additional information, known as a “second request”, from the Federal Trade Commission as part of the regulatory review process for the transaction. The transaction is currently expected to close in the fourth quarter of 2021, subject to receipt of regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and satisfaction of other closing conditions specified in the acquisition agreement. Our financial results will not include Aerojet Rocketdyne’s results until the acquisition is closed.

Quarters Ended Six Months Ended
June 28,
2020 June 30,
2019 June 28,
2020 June 30,
2019
Weighted average common shares outstanding for basic
computations
279.8 282.2 280.5 282.3
Weighted average dilutive effect of equity awards 1.0 1.7 1.2 1.8
Weighted average common shares outstanding for diluted
computations
280.8 283.9 281.7 284.1


	Quarters Ended		Six Months Ended
	June 27, 2021	June 28, 2020	June 27, 2021	June 28, 2020
Weighted average common shares outstanding for basic computations	277.4	279.8	278.1	280.5
Weighted average dilutive effect of equity awards	1.0	1.0	1.0	1.2
Weighted average common shares outstanding for diluted computations	278.4	280.8	279.1	281.7

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) and exercise of outstanding stock options based on the treasury stock method. There were 0 significant anti-dilutive equity awards during the quarters and six months ended June ~~28, 2020~~27, 2021 or June ~~30, 2019.~~28, 2020.

Business segment operating profit also 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~~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, retiree benefits, significant severance actions, significant asset impairments, gains or losses from ~~significant~~ divestitures, and other miscellaneous corporate activities.

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



	Quarters Ended				Six Months Ended
	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020
Net sales
Aeronautics	$	6,666	$	6,503	$	13,053	$	12,872
Missiles and Fire Control	2,944		2,801		5,693		5,420
Rotary and Mission Systems	4,242		4,039		8,349		7,785
Space	3,177		2,877		6,192		5,794
Total net sales	$	17,029	$	16,220	$	33,287	$	31,871
Operating profit
Aeronautics	$	572	$	739	$	1,265	$	1,411
Missiles and Fire Control	401		370		797		766
Rotary and Mission Systems	458		429		891		805
Space	335		252		562		533
Total business segment operating profit	1,766		1,790		3,515		3,515
Unallocated items
FAS/CAS operating adjustment	489		469		978		938
Stock-based compensation	(80)		(73)		(127)		(115)

Severance and restructuring charges	0		0		(36)		0
Other, net	17		(100)		44		(130)
Total unallocated items	426		296		859		693
Total consolidated operating profit	$	2,192	$	2,086	$	4,374	$	4,208
Intersegment sales
Aeronautics	$	52	$	61	$	105	$	120
Missiles and Fire Control	167		140		296		276
Rotary and Mission Systems	448		502		926		1,000
Space	92		105		174		213
Total intersegment sales	$	759	$	808	$	1,501	$	1,609
Amortization of purchased intangibles
Aeronautics	$	(1)	$	0	$	(1)	$	0
Missiles and Fire Control	0		0		(1)		(1)
Rotary and Mission Systems	(58)		(58)		(116)		(116)
Space	(22)		(7)		(44)		(14)
Total amortization of purchased intangibles	$	(81)	$	(65)	$	(162)	$	(131)

Quarters Ended Six Months Ended
June 28,
2020 June 30,
2019 June 28,
2020 June 30,
2019
Net sales
Aeronautics $ 6,503 $ 5,550 $ 12,872 $ 11,134
Missiles and Fire Control 2,801 2,411 5,420 4,761
Rotary and Mission Systems 4,039 3,768 7,785 7,530
Space 2,877 2,698 5,794 5,338
Total net sales $ 16,220 $ 14,427 $ 31,871 $ 28,763
Operating profit
Aeronautics $ 739 $ 592 $ 1,411 $ 1,177
Missiles and Fire Control 370 327 766 744
Rotary and Mission Systems 429 347 805 726
Space 252 288 533 622
Total business segment operating profit 1,790 1,554 3,515 3,269
Unallocated items
FAS/CAS operating adjustment ^(a)
469 512 938 1,024
Stock-based compensation (73) (67) (115) (104)
Other, net ^(b)
(100) 9 (130) 102
Total unallocated items 296 454 693 1,022
Total consolidated operating profit $ 2,086 $ 2,008 $ 4,208 $ 4,291
Intersegment sales
Aeronautics $ 61 $ 47 $ 120 $ 89
Missiles and Fire Control 140 144 276 265
Rotary and Mission Systems 502 461 1,000 960
Space 105 85 213 153
Total intersegment sales $ 808 $ 737 $ 1,609 $ 1,467

Quarters Ended Six Months Ended
June 28,
2020 June 30,
2019 June 28,
2020 June 30,
2019
Total FAS income (expense) and CAS costs
FAS pension income (expense) $ 29 $ (273) $ 59 $ (546)
Less: CAS pension cost 495 641 989 1,282
Net FAS/CAS pension adjustment $ 524 $ 368 $ 1,048 $ 736
Service and non-service cost reconciliation
FAS pension service cost $ (26) $ (129) $ (51) $ (258)
Less: CAS pension cost 495 641 989 1,282
FAS/CAS operating adjustment 469 512 938 1,024
Non-operating FAS pension income (expense) 55 (144) 110 (288)
Net FAS/CAS pension adjustment $ 524 $ 368 $ 1,048 $ 736

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 FAS pension and other postretirement benefit plan ~~expense~~income calculated in accordance with FAS requirements under U.S. GAAP. The operating portion of the net 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)~~ component is included in other non-operating income, ~~(expense),~~ net 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 operating adjustment.

~~We expect to have~~Our total net FAS/CAS pension adjustment for the quarters and six months ended June 27, 2021 and June 28, 2020, including the service and non-service cost components of FAS pension income ~~in 2020, compared to FAS pension expense in prior periods. We no longer have service costs~~ for ~~certain of~~ our ~~plans as a result of completing the planned freeze of our salaried~~qualified defined benefit pension plans, effective January 1, 2020 that was previously announced on July 1, 2014. See “Note 6 – Postretirement Benefit Plans” for additional information regarding the corporation’s FAS pension expense or income and CAS pension cost.were as follows (in millions):


	Quarters Ended				Six Months Ended
	June 27, 2021		June 28, 2020		June 27, 2021			June 28, 2020
Total FAS income and CAS costs
FAS pension income	$	67	$	29		$	133	$	59
Less: CAS pension cost	516		495			1,032		989
Net FAS/CAS pension adjustment	$	583	$	524		$	1,165	$	1,048

Service and non-service cost reconciliation
FAS pension service cost	$	(27)	$	(26)		$	(54)	$	(51)
Less: CAS pension cost	516		495			1,032		989
FAS/CAS operating adjustment	489		469			978		938
Non-operating FAS pension income	94		55			187		110
Net FAS/CAS pension adjustment	$	583	$	524		$	1,165	$	1,048

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


	Quarter Ended June 27, 2021
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	5,583	$	2,571	$	3,369	$	2,735	$	14,258
Services	1,083		373		873		442		2,771
Total net sales	$	6,666	$	2,944	$	4,242	$	3,177	$	17,029
Net sales by contract type
Fixed-price	$	4,920	$	1,991	$	2,802	$	645	$	10,358
Cost-reimbursable	1,746		953		1,440		2,532		6,671
Total net sales	$	6,666	$	2,944	$	4,242	$	3,177	$	17,029
Net sales by customer
U.S. Government	$	4,367	$	2,176	$	3,063	$	2,719	$	12,325
International (a)	2,283		766		1,117		447		4,613
U.S. commercial and other	16		2		62		11		91
Total net sales	$	6,666	$	2,944	$	4,242	$	3,177	$	17,029
Net sales by geographic region
United States	$	4,383	$	2,178	$	3,125	$	2,730	$	12,416
Asia Pacific	914		56		534		2		1,506
Europe	944		232		223		444		1,843
Middle East	311		467		177		1		956
Other	114		11		183		0		308
Total net sales	$	6,666	$	2,944	$	4,242	$	3,177	$	17,029

Quarter Ended June 28, 2020
Aeronautics MFC RMS Space Total
Net sales
Products $ 5,474 $ 2,422 $ 3,259 $ 2,417 $ 13,572
Services 1,029 379 780 460 2,648
Total net sales $ 6,503 $ 2,801 $ 4,039 $ 2,877 $ 16,220
Net sales by contract type
Fixed-price $ 4,467 $ 1,877 $ 2,639 $ 483 $ 9,466
Cost-reimbursable 2,036 924 1,400 2,394 6,754
Total net sales $ 6,503 $ 2,801 $ 4,039 $ 2,877 $ 16,220
Net sales by customer
U.S. Government $ 5,352 $ 2,098 $ 2,926 $ 2,533 $ 12,909
International ^(a)
1,132 699 1,011 330 3,172
U.S. commercial and other 19 4 102 14 139
Total net sales $ 6,503 $ 2,801 $ 4,039 $ 2,877 $ 16,220
Net sales by geographic region
United States $ 5,371 $ 2,102 $ 3,028 $ 2,547 $ 13,048
Asia Pacific 353 72 464 16 905
Europe 506 170 170 314 1,160
Middle East 213 442 213 — 868
Other 60 15 164 — 239
Total net sales $ 6,503 $ 2,801 $ 4,039 $ 2,877 $ 16,220


	Six Months Ended June 27, 2021
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	11,062	$	4,981	$	6,669	$	5,299	$	28,011
Services	1,991		712		1,680		893		5,276
Total net sales	$	13,053	$	5,693	$	8,349	$	6,192	$	33,287
Net sales by contract type
Fixed-price	$	9,654	$	3,869	$	5,479	$	1,259	$	20,261
Cost-reimbursable	3,399		1,824		2,870		4,933		13,026
Total net sales	$	13,053	$	5,693	$	8,349	$	6,192	$	33,287
Net sales by customer
U.S. Government	$	8,640	$	4,217	$	5,873	$	5,270	$	24,000
International (a)	4,382		1,469		2,337		904		9,092
U.S. commercial and other	31		7		139		18		195
Total net sales	$	13,053	$	5,693	$	8,349	$	6,192	$	33,287
Net sales by geographic region
United States	$	8,671	$	4,224	$	6,012	$	5,288	$	24,195
Asia Pacific	1,807		107		1,184		4		3,102
Europe	1,798		414		424		899		3,535
Middle East	595		925		347		1		1,868
Other	182		23		382		0		587
Total net sales	$	13,053	$	5,693	$	8,349	$	6,192	$	33,287

Six Months Ended June 28, 2020
Aeronautics MFC RMS Space Total
Net sales
Products $ 10,929 $ 4,697 $ 6,245 $ 4,867 $ 26,738
Services 1,943 723 1,540 927 5,133
Total net sales $ 12,872 $ 5,420 $ 7,785 $ 5,794 $ 31,871
Net sales by contract type
Fixed-price $ 9,051 $ 3,595 $ 5,121 $ 1,002 $ 18,769
Cost-reimbursable 3,821 1,825 2,664 4,792 13,102
Total net sales $ 12,872 $ 5,420 $ 7,785 $ 5,794 $ 31,871
Net sales by customer
U.S. Government $ 9,385 $ 4,053 $ 5,714 $ 5,016 $ 24,168
International ^(a)
3,453 1,359 1,866 750 7,428
U.S. commercial and other 34 8 205 28 275
Total net sales $ 12,872 $ 5,420 $ 7,785 $ 5,794 $ 31,871
Net sales by geographic region
United States $ 9,419 $ 4,061 $ 5,919 $ 5,044 $ 24,443
Asia Pacific 1,348 147 782 44 2,321
Europe 1,454 338 337 712 2,841
Middle East 541 849 420 (6) 1,804
Other 110 25 327 — 462
Total net sales $ 12,872 $ 5,420 $ 7,785 $ 5,794 $ 31,871
^(a)International sales include FMS contracted through the U.S. Government and direct commercial sales to international governments and other international customers.
International sales include FMS contracted through the U.S. Government and direct commercial sales to international governments and other international customers.

Quarter Ended June 30, 2019
Aeronautics MFC RMS Space Total
Net sales
Products $ 4,740 $ 1,963 $ 3,023 $ 2,277 $ 12,003
Services 810 448 745 421 2,424
Total net sales $ 5,550 $ 2,411 $ 3,768 $ 2,698 $ 14,427
Net sales by contract type
Fixed-price $ 4,040 $ 1,444 $ 2,526 $ 535 $ 8,545
Cost-reimbursable 1,510 967 1,242 2,163 5,882
Total net sales $ 5,550 $ 2,411 $ 3,768 $ 2,698 $ 14,427
Net sales by customer
U.S. Government $ 3,476 $ 1,900 $ 2,675 $ 2,332 $ 10,383
International ^(a)
2,010 475 974 360 3,819
U.S. commercial and other 64 36 119 6 225
Total net sales $ 5,550 $ 2,411 $ 3,768 $ 2,698 $ 14,427
Net sales by geographic region
United States $ 3,540 $ 1,936 $ 2,794 $ 2,338 $ 10,608
Asia Pacific 784 86 418 23 1,311
Europe 847 103 143 328 1,421
Middle East 335 272 247 9 863
Other 44 14 166 — 224
Total net sales $ 5,550 $ 2,411 $ 3,768 $ 2,698 $ 14,427
Six Months Ended June 30, 2019
Aeronautics MFC RMS Space Total
Net sales
Products $ 9,536 $ 3,879 $ 6,082 $ 4,476 $ 23,973
Services 1,598 882 1,448 862 4,790
Total net sales $ 11,134 $ 4,761 $ 7,530 $ 5,338 $ 28,763
Net sales by contract type
Fixed-price $ 8,210 $ 2,979 $ 5,145 $ 1,058 $ 17,392
Cost-reimbursable 2,924 1,782 2,385 4,280 11,371
Total net sales $ 11,134 $ 4,761 $ 7,530 $ 5,338 $ 28,763
Net sales by customer
U.S. Government $ 6,911 $ 3,533 $ 5,350 $ 4,568 $ 20,362
International ^(a)
4,105 1,145 1,969 755 7,974
U.S. commercial and other 118 83 211 15 427
Total net sales $ 11,134 $ 4,761 $ 7,530 $ 5,338 $ 28,763
Net sales by geographic region
United States $ 7,029 $ 3,616 $ 5,561 $ 4,583 $ 20,789
Asia Pacific 1,690 208 748 31 2,677
Europe 1,645 225 341 709 2,920
Middle East 672 685 532 15 1,904
Other 98 27 348 — 473
Total net sales $ 11,134 $ 4,761 $ 7,530 $ 5,338 $ 28,763

^{Quarter Ended June 28, 2020
Aeronautics MFC RMS Space Total
Net sales
Products $ 5,474 $ 2,422 $ 3,259 $ 2,417 $ 13,572
Services 1,029 379 780 460 2,648
Total net sales $ 6,503 $ 2,801 $ 4,039 $ 2,877 $ 16,220
Net sales by contract type
Fixed-price $ 4,467 $ 1,877 $ 2,639 $ 483 $ 9,466
Cost-reimbursable 2,036 924 1,400 2,394 6,754
Total net sales $ 6,503 $ 2,801 $ 4,039 $ 2,877 $ 16,220
Net sales by customer
U.S. Government $ 5,352 $ 2,098 $ 2,926 $ 2,533 $ 12,909
International (a) 1,132 699 1,011 330 3,172
U.S. commercial and other 19 4 102 14 139
Total net sales $ 6,503 $ 2,801 $ 4,039 $ 2,877 $ 16,220
Net sales by geographic region
United States $ 5,371 $ 2,102 $ 3,028 $ 2,547 $ 13,048
Asia Pacific 353 72 464 16 905
Europe 506 170 170 314 1,160
Middle East 213 442 213 0 868
Other 60 15 164 0 239
Total net sales $ 6,503 $ 2,801 $ 4,039 $ 2,877 $ 16,220}


	Six Months Ended June 28, 2020
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	10,929	$	4,697	$	6,245	$	4,867	$	26,738
Services	1,943		723		1,540		927		5,133
Total net sales	$	12,872	$	5,420	$	7,785	$	5,794	$	31,871
Net sales by contract type
Fixed-price	$	9,051	$	3,595	$	5,121	$	1,002	$	18,769
Cost-reimbursable	3,821		1,825		2,664		4,792		13,102
Total net sales	$	12,872	$	5,420	$	7,785	$	5,794	$	31,871
Net sales by customer
U.S. Government	$	9,385	$	4,053	$	5,714	$	5,016	$	24,168
International (a)	3,453		1,359		1,866		750		7,428
U.S. commercial and other	34		8		205		28		275
Total net sales	$	12,872	$	5,420	$	7,785	$	5,794	$	31,871
Net sales by geographic region
United States	$	9,419	$	4,061	$	5,919	$	5,044	$	24,443
Asia Pacific	1,348		147		782		44		2,321
Europe	1,454		338		337		712		2,841
Middle East	541		849		420		(6)		1,804
Other	110		25		327		0		462
Total net sales	$	12,872	$	5,420	$	7,785	$	5,794	$	31,871

Our Aeronautics business segment includes our largest program, the F-35 Lightning II Joint Strike Fighter, an international multi-role, multi-variant, stealth fighter aircraft. Net sales for the F-35 program represented approximately 27% of our total consolidated net sales for both the quarter and six months ended June 27, 2021 and 28% of our total consolidated net sales for both the quarter and six months ended June 28, ~~2020 and 26% of our total consolidated net sales for both the quarter and six months ended June 30, 2019.~~2020.

Contract assets increased ~~$727 million~~$1.9 billion during the six months ended June ~~28, 2020,~~27, 2021, primarily due to the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations during the six months ended June ~~28, 2020~~27, 2021 for which we have not yet billed our customers. There were 0 significant credit or impairment losses related to our contract assets during the quarters and six months ended June ~~28, 2020~~27, 2021 and June ~~30, 2019.~~28, 2020.

Contract liabilities ~~increased $427~~decreased $166 million during the six months ended June ~~28, 2020,~~27, 2021, primarily due to ~~payments received~~revenue recognized in excess of ~~revenue recognized~~payments received on these performance obligations. During the quarter and six months ended June 27, 2021, we recognized $900 million and $3.2 billion of our contract liabilities at December 31, 2020 as revenue. During the quarter and six months ended June 28, 2020, we recognized $1.0 billion and $2.6 billion of our contract liabilities ~~that existed~~ at December 31, 2019 as revenue. ~~During the quarter and six months ended June 30, 2019, we recognized $1.1 billion and $2.9 billion of our contract liabilities at December 31, 2018 as revenue.~~

identify and 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). Pre-contract costs that are initially capitalized in inventory are generally recognized as cost of sales 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 June ~~28, 2020~~27, 2021 and December 31, ~~2019, $638~~2020, $693 million and ~~$493~~$583 million of pre-contract costs were included in inventories.

Quarters Ended Six Months Ended
June 28,
2020 June 30,
2019 June 28,
2020 June 30,
2019
Qualified defined benefit pension plans
Service cost $ 26 $ 129 $ 51 $ 258
Interest cost 384 451 769 903
Expected return on plan assets (566) (575) (1132) (1,150)
Recognized net actuarial losses 212 351 424 702
Amortization of prior service credits (85) (83) (171) (167)
Total net periodic benefit (income) cost $ (29) $ 273 $ (59) $ 546
Retiree medical and life insurance plans
Service cost $ 4 $ 3 $ 7 $ 7
Interest cost 17 24 35 48
Expected return on plan assets (32) (27) (64) (55)
Recognized net actuarial losses (1) — (2) 1
Amortization of prior service costs 9 11 19 21
Total net periodic benefit (income) cost $ (3) $ 11 $ (5) $ 22

As previously announced on July 1, 2014, we completed the final step of the planned freeze of our qualified and nonqualified defined benefit pension plans for salaried employees effective January 1, 2020; the plans are now fully frozen. With the freeze complete, the majority of our salaried employees participate in an enhanced defined contribution retirement savings plan.



	Quarters Ended				Six Months Ended
	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020
Qualified defined benefit pension plans
Service cost	$	27	$	26	$	54	$	51
Interest cost	310		384		621		769
Expected return on plan assets	(569)		(566)		(1,138)		(1,132)
Recognized net actuarial losses	252		212		504		424
Amortization of prior service credits	(87)		(85)		(174)		(171)
Total net periodic benefit income	$	(67)	$	(29)	$	(133)	$	(59)
Retiree medical and life insurance plans
Service cost	$	4	$	4	$	7	$	7
Interest cost	13		17		26		35
Expected return on plan assets	(35)		(32)		(70)		(64)
Recognized net actuarial gains	0		(1)		0		(2)
Amortization of prior service costs	9		9		18		19
Total net periodic benefit income	$	(9)	$	(3)	$	(19)	$	(5)

The recognized net actuarial losses and amortization of prior service credits or costs in the table above, along with similar costs related to our other postretirement benefit plans ($53 million and $7 million for the quarter and six months ended June 27, 2021 and $5 million and $10 million for the quarter and six months ended June 28, ~~2020, and $9 million and $20 million for the quarter and six months ended June 30, 2019)~~2020) were reclassified from accumulated other comprehensive loss (AOCL) and recorded as a component of net periodic benefit ~~(income) cost~~income for the periods presented. These costs totaled $177 million ($140 million, net of tax) and $355 million ($280 million, net of tax) during the quarter and six months ended June 27, 2021, and $140 million ($110 million, net of tax) and $280 million ($220 million, net of tax) during the quarter and six months ended June 28, 2020 and ~~$288 million ($227 million, net of tax) and $577 million ($454 million, net of tax) during the quarter and six months ended June 30, 2019 and~~ were recorded on our consolidated statements of comprehensive income as an increase to other comprehensive income.

We are a party to or have property subject 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 corporation as a whole, notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings and cash flows in any particular interim reporting period. 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 have been 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.

As a result of our acquisition of Sikorsky Aircraft Corporation (Sikorsky), we assumed the defense of and any potential liability for 2 civil False Claims Act lawsuits pending in the U.S. District Court for the Eastern District of Wisconsin. In October 2014, the U.S. Government filed a complaint in intervention in the first suit, which was brought by qui tam relator Mary Patzer, a former Derco Aerospace (Derco) employee. In May 2017, the U.S. Government filed a complaint in intervention in ~~the~~a second suit, which was brought by qui tam relator Peter Cimma, a former Sikorsky Support Services, Inc. (SSSI) employee. In November 2017, the Court consolidated the cases into a single action for discovery and trial.

The U.S. Government alleges that Sikorsky and 2 of its wholly-owned subsidiaries, Derco and SSSI, violated the civil False Claims Act and the Truth in Negotiations Act in connection with a contract the U.S. Navy awarded to SSSI in June 2006 to support the Navy’s T-34 and T-44 fixed-wing turboprop training aircraft. SSSI subcontracted with Derco, primarily to procure and manage spare parts for the training aircraft. The U.S. Government contends that SSSI overbilled the Navy on the contract as the result of Derco’s use of prohibited cost-plus-percentage-of-cost pricing to add profit and overhead costs as a percentage of the price of the spare parts that Derco procured and then sold to SSSI. The U.S. Government also alleges that Derco’s claims to SSSI, SSSI’s claims to the Navy, and SSSI’s yearly Certificates of Final Indirect Costs from 2006 through 2012 were false and that SSSI submitted inaccurate cost or pricing data in violation of the Truth in Negotiations Act for a sole-sourced, follow-on “bridge” contract. The U.S. Government’s complaints assert common law claims for breach of contract and unjust enrichment.

The U.S. Government further alleged violations of the Anti-Kickback Act and False Claims Act based on a monthly “chargeback,” through which SSSI billed Derco for the cost of certain SSSI personnel, allegedly in exchange for SSSI’s permitting a pricing arrangement that was “highly favorable” to Derco. On January 12, 2018, the Corporation filed a partial motion to dismiss intended to narrow the U.S. Government’s claims, including by seeking dismissal of the Anti-Kickback Act allegations. The Corporation also moved to dismiss Cimma as a party under the False Claims Act’s first-to-file rule, which permits only the first relator to recover in a pending case. The District Court granted these motions, in part, on July 20, 2018, dismissing the Government’s claims under the Anti-Kickback Act and dismissing Cimma as a party to the litigation.

Lockheed Martin Services, Inc. (LMSI) and a current Lockheed Martin vice president. The dollar amount of damages sought is not specified but DOJ seeks treble damages with respect to the False Claims Act and penalties that are subject to doubling under the Anti-Kickback Act. The allegations relate primarily to information technology services performed by LMSI under a subcontract to MSA and the pricing by MSA and LMSI of those services as well as Lockheed Martin’s payment of standard incentive compensation to certain employees who were seconded to MSA, including the vice president. MSA is a joint venture that holds a prime contract to provide infrastructure support services at DOE’s Hanford facility. On April 23, 2019, the parties each filed partial motions to dismiss the U.S. Government’s False Claims Act and Anti-Kickback Act allegations. On January 13, 2020, the court dismissed the Anti-Kickback Act claim against all defendants with prejudice and denied the motions to dismiss the False Claims Act claims.

On August 16, 2016, we divested our former Information Systems & Global Solutions (IS&GS) business segment to Leidos Holdings, Inc. (Leidos) in a transaction that resulted in IS&GS becoming part of Leidos (the Transaction). In the Transaction, Leidos acquired IS&GS’ interest in MSA and the liabilities related to Lockheed Martin’s participation in MSA. Included within the liabilities assumed were those associated with this lawsuit. Lockheed Martin transferred to Leidos a reserve of approximately $38 million established by Lockheed Martin with respect to its potential liability and that of its affiliates and agreed to indemnify Leidos with respect to the liabilities assumed for damages to Leidos for 100% of amounts in excess of this reserve up to $64 million and 50% of amounts in excess of $64 million.

We cannot reasonably estimate our exposure at this time, but it is possible that a settlement by or judgment against any of the defendants could implicate Lockheed Martin’s indemnification obligations as described above. At present, in view of what we believe to be the strength of the defenses, our belief that Leidos assumed the liabilities, and our view of the structure of the indemnity, we do not believe it probable that we will incur a material loss and have not taken any reserve.v. Metropolitan Transportation Authority

On April 24, 2009, we filed a declaratory judgment action against the New York Metropolitan Transportation Authority and its Capital Construction Company (collectively, the MTA) asking the U.S. District Court for the Southern District of New York to find that the MTA is in material breach of our agreement based on the MTA’s failure to provide access to sites where work must be performed and the customer-furnished equipment necessary to complete the contract. The MTA filed an answer and counterclaim alleging that we breached the contract and subsequently terminated the contract for alleged default. The primary damages sought by the MTA are the costs to complete the contract and potential re-procurement costs. While we are unable to estimate the cost of another contractor to complete the contract and the costs of re-procurement, we note that our contract with the MTA had a total value of $323 million, of which $241 million was paid to us, and that the MTA is seeking damages of approximately $190 million. We dispute the MTA’s allegations and are defending against them. Additionally, following an investigation, our sureties on a performance bond related to this matter, who were represented by independent counsel, concluded that the MTA’s termination of the contract was improper. Finally, our declaratory judgment action was later amended to include claims for monetary damages against the MTA of approximately $95 million. This matter was taken under submission by the District Court in December 2014, after a five-week bench trial and the filing of post-trial pleadings by the parties. We continue to await a decision from the District Court. Although this matter relates to our former IS&GS business, we retained responsibility for the litigation when we divested IS&GS in 2016.

We are involved in proceedings and potential proceedings relating to soil, sediment, surface water, and groundwater contamination, disposal of hazardous substances, and other environmental matters at several of our current or former facilities, facilities for which we may have contractual responsibility, and at third-party sites where we have been designated as a potentially responsible party (PRP). A substantial portion of environmental costs will be included in our net sales and cost of sales in future periods pursuant to U.S. Government regulations. At the time a liability is recorded for future environmental costs, we record assets for estimated future recovery considered probable through the pricing of products and services to agencies of the U.S. Government, regardless of the contract form (e.g., cost-reimbursable, fixed-price). We continually evaluate the recoverability of our assets for the portion of environmental costs that are probable of

future recovery by assessing, among other factors, U.S. Government regulations, our U.S. Government business base and contract mix, our history of receiving reimbursement of such costs, and efforts by some U.S. Government representatives to limit such reimbursement. We include the portions of those environmental costs expected to be allocated to our non-U.S. Government contracts, or determined not to be recoverable under U.S. Government contracts, in our cost of sales at the time the liability is ~~established.~~established or adjusted.

At June ~~28, 2020~~27, 2021 and December 31, ~~2019,~~2020, the aggregate amount of liabilities recorded relative to environmental matters was ~~$805~~$778 million and ~~$810~~$789 million, most of which are recorded in other noncurrent liabilities on our consolidated balance sheets. We have recorded assets for the portion of environmental costs that are probable of future recovery under U.S. Government contracts totaling ~~$698~~$675 million and ~~$703~~$685 million at June ~~28, 2020~~27, 2021 and December 31, ~~2019,~~2020, most of which are recorded in other noncurrent assets on our consolidated balance sheets, for the estimated future recovery of these costs, as we consider the recovery probable based on the factors previously mentioned. We project costs and recovery of costs over approximately 20 years.sheets.

Environmental remediation activities usually span many years, which makes estimating liabilities a matter of judgment because of uncertainties with respect to assessing the extent of the contamination as well as such factors as changing remediation technologies and changing regulatory environmental standards. We are monitoring or investigating a number of former and present operating facilities for potential future remediation. We perform quarterly reviews of the status of our environmental remediation sites and the related liabilities and receivables. Additionally, in our quarterly reviews, we consider these and other factors in estimating the timing and amount of any future costs that may be required for remediation activities, and we record a liability when it is probable that a loss has occurred or will occur for a particular site and the loss can be reasonably estimated. The amount of liability recorded is based on our estimate of the costs to be incurred for remediation ~~at a particular~~for that site. We do not discount the recorded liabilities, as the amount and timing of future cash payments are not fixed or cannot be reliably determined. We cannot reasonably determine the extent of our financial exposure in all cases as, although a loss may be probable or reasonably possible, in some cases it is not possible at this time to estimate the ~~loss or~~ reasonably possible loss or range of loss. We project costs and recovery of costs over approximately 20 years.

We also pursue claims for recovery of costs incurred or for contribution to site remediation costs against other PRPs, including the U.S. Government, and are conducting remediation activities under various consent decrees, orders, and agreements relating to soil, groundwater, sediment, or surface water contamination at certain sites of former or current operations. Under agreements related to certain sites in California, New York, United States Virgin Islands and Washington, the U.S. Government and/or a private party reimburses us an amount equal to a percentage, specific to each site, of expenditures for certain remediation activities in ~~the U.S. Government’s~~their capacity as ~~a PRP~~PRPs under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).

In addition to the proceedings and potential proceedings discussed above, the California ~~previously established~~State Water Resources Control Board, a branch of the California Environmental Protection Agency, has indicated it will work to re-establish a maximum level of the contaminant hexavalent chromium in drinking water after a prior standard of 10 parts per billion (ppb)~~. This standard~~ was ~~successfully~~ challenged ~~by the California Manufacturers~~ and Technology Association (CMTA) for failure to conduct the required economic feasibility analysis. In response to the court’s ruling, the State Water Resources Control Board (State Board), a branch of the California Environmental Protection Agency, withdrew the hexavalent chromium standard from the published regulations, leaving only the 50 ppb standard for total chromium. The State Board has indicated it will work to re-establish a hexavalent chromium standard. Further, the ~~U.S. Environmental Protection Agency (U.S. EPA) is considering whether to regulate hexavalent chromium. California~~withdrawn, and is also reevaluating its existing drinking water standard of 6 ppb for perchlorate. The U.S. ~~EPA~~Environmental Protection Agency decided in June 2020 not to regulate perchlorate in drinking water at the federal ~~level.~~level, although this decision has been challenged, and is considering whether to regulate hexavalent chromium.

If substantially lower standards are adopted for perchlorate (in California) or for hexavalent chromium (in California or at the federal level), we expect a material increase in our estimates for environmental liabilities and the related assets for the portion of the increased costs that are probable of future recovery in the pricing of our products and services for the U.S. Government. The amount that would be allocable to our non-U.S. Government contracts or that is determined not to be recoverable under U.S. Government contracts would be expensed, which may have a material effect on our earnings in any particular interim reporting period.

We have entered into standby letters of credit and surety bonds issued on our behalf by financial institutions, and we have directly issued guarantees to third parties primarily relating to advances received from customers and the guarantee of future performance on certain contracts. Letters of credit and surety bonds generally are available for draw down in the event we do not perform. In some cases, we may guarantee the contractual performance of third parties such as joint venture partners. We had total outstanding letters of credit, surety bonds and third-party guarantees aggregating $3.3 billion and ~~$3.6~~$3.4 billion at June ~~28, 2020~~27, 2021 and December 31, ~~2019.~~2020. Third-party guarantees do not include guarantees issued on behalf of subsidiaries and other consolidated entities.

At June ~~28, 2020~~27, 2021 and December 31, ~~2019,~~2020, third-party guarantees totaled ~~$748~~$852 million and ~~$996~~$871 million, of which approximately ~~68%~~70% and ~~76%~~71% related to guarantees of contractual performance of joint ventures to which we currently are or previously were a party. These amounts represent our estimate of the maximum amounts we would expect to incur upon the contractual non-performance of the joint venture, joint venture partners or divested businesses. Generally, we also have cross-indemnities in place that may enable us to recover amounts that may be paid on behalf of a joint venture partner.

Substantially all assets measured at fair value, other than derivatives, represent investments held in a separate trust to fund certain of our ~~nonqualified~~non-qualified deferred compensation plans and are recorded in other noncurrent assets on our consolidated balance sheets. The fair values of mutual funds and certain other securities are determined by reference to the quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction costs. The fair values of U.S. Government and certain other securities are determined using pricing models that use observable inputs (e.g., interest rates and yield curves observable at commonly quoted intervals), bids provided by brokers or dealers or quoted prices of securities with similar characteristics. The fair values of derivative instruments, which consist of foreign currency forward contracts, including embedded derivatives, and interest rate swap contracts, are primarily determined based on the present value of future cash flows using model-derived valuations that use observable inputs such as interest rates, credit spreads and foreign currency exchange rates.

principally to reduce our exposure to market risks from changes in foreign currency exchange rates and interest rates. We do not enter into or hold derivative instruments for speculative trading purposes. We transact business globally and are subject to risks associated with changing foreign currency exchange rates. We enter into foreign currency hedges such as forward and option contracts that change in value as foreign currency exchange rates change. Our most significant foreign currency exposures relate to the British pound sterling, the euro, the Canadian dollar and the Australian dollar. These contracts hedge forecasted foreign currency transactions in order to mitigate fluctuations in our earnings and cash flows associated with changes in foreign currency exchange rates. We designate foreign currency hedges as cash flow hedges. We also are exposed to the impact of interest rate changes primarily through our borrowing activities. For fixed rate borrowings, we may use variable interest rate swaps, effectively converting fixed rate borrowings to variable rate borrowings in order to ~~reduce~~hedge changes in the ~~amount~~fair value of ~~interest paid.~~the debt. These swaps are designated as fair value hedges. For variable rate borrowings, we may use fixed interest rate swaps, effectively converting variable rate borrowings to fixed rate borrowings in order to mitigate the impact of interest rate changes on earnings. These swaps are designated as cash flow hedges. We also may enter into derivative instruments that are not designated as hedges and do not qualify for hedge accounting, which are intended to mitigate certain economic exposures.

The aggregate notional amount of our outstanding ~~interest rate swaps was $572 million and $750 million~~foreign currency hedges at June ~~28, 2020~~27, 2021 and December 31, ~~2019.~~2020 was $3.6 billion and $3.4 billion. The aggregate notional amount of our outstanding ~~foreign currency hedges~~interest rate swaps was $722 million and $572 million at June ~~28, 2020~~27, 2021 and December 31, ~~2019 was $3.4 billion and $3.8 billion.~~2020. The fair values of our outstanding foreign currency hedges and interest rate swaps ~~and foreign currency hedges~~ at June ~~28, 2020~~27, 2021 and December 31, ~~2019~~2020 were not significant. Derivative instruments did not have a material impact on net earnings and comprehensive income during the quarters and six months ended June ~~28, 2020~~27, 2021 and June ~~30, 2019.~~28, 2020. Substantially all of our derivatives are designated for hedge accounting.

$16.1 billion and ~~$15.9~~$16.9 billion at June ~~28, 2020~~27, 2021 and December 31, ~~2019.~~2020. The outstanding principal amount of debt was ~~$13.8~~$13.3 billion at both June ~~28, 2020~~27, 2021 and December 31, ~~2019,~~2020, excluding $1.1 ~~billion and $1.2~~ billion of unamortized discounts and issuance costs at both June ~~28, 2020~~27, 2021 and December 31, ~~2019.~~2020. The estimated fair values of our outstanding debt were determined based on the present value of future cash flows using model-derived valuations that use observable inputs such as interest rates and credit spreads (Level 2).

During the six months ended June ~~28, 2020,~~27, 2021, we repurchased ~~1.4~~4.2 million shares of our common stock for ~~$541 million~~$1.5 billion under accelerated share repurchase plans (ASR) pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934, some of which were settled subsequent to the end of the second quarter. Additionally, during the first quarter of 2020, we entered into an accelerated share repurchase (ASR) agreement to repurchase $500 million of our common stock through April 2020. Under the terms of the ASR agreement, in March 2020 we paid $500 million and received an initial delivery of 1.0 million shares of our common stock. Upon final settlement of the ASR agreement in April 2020, we received an additional 0.4 million shares of our common stock for 0 additional consideration based on the average price paid per share of $347.16, calculated with reference to the volume-weighted average price (VWAP) of our common stock over the term of the agreement, less a negotiated discount.

1934. The total remaining authorization for future common share repurchases under our share repurchase program was ~~$1.8~~$1.5 billion as of June ~~28, 2020.~~27, 2021. As we repurchase our common shares, we reduce common stock for the $1 of par value of the shares repurchased, with the excess purchase price over par value recorded as a reduction of additional paid-in capital. If additional paid-in capital is reduced to zero, we record the remainder of the excess purchase price over par value as a reduction of retained earnings. Due to the volume of repurchases and the prices at which these were made, additional paid-in capital was reduced to 0, with the remainder of the excess purchase price over par value of $841 million and $278 million recorded as a reduction to retained earnings during the six months ended June 28, 2020 and June 30, 2019.

We declared cash dividends totaling ~~$1.4~~$1.5 billion ($5.20 per share) and $2.2 billion($7.80 per share) during the quarter and six months ended June 27, 2021, compared to $1.4 billion($4.80 per share) and $2.0 billion ($7.20 per share) during the quarter and six months ended June 28, 2020. In June 2021, we declared our 2021 third quarter dividend totaling approximately $720 million ($2.60 per share), which will be paid in September 2021; and in June 2020, we declared our 2020 third quarter dividend totaling $671 million ($2.40 per share), which was paid in September 2020. Amounts declared and paid during the quarters and six months ended June 27, 2021 and June 28, 2020 ~~compared~~may differ due to ~~$1.2 billion ($4.40 per share)~~timing of dividend-equivalents paid on RSUs and ~~$1.9 billion ($6.60 per~~PSUs. These dividend-equivalents are accrued during the vesting period and are paid upon the vesting of the RSUs and PSUs which primarily occurs in the first quarter each year.

During the six months ended June 28, 2020, we granted certain employees approximately 0.5 million RSUs with a weighted average grant date fair value of $384.17 per RSU. The grant date fair value of these RSUs is equal to the closing market price of our common stock on the grant date less a discount to reflect the delay in payment of dividend-equivalent cash payments that are made only upon vesting, which is generally three years from the grant date. We recognize the grant date fair value of RSUs, less estimated forfeitures, as compensation expense ratably over the requisite service period, which is shorter than the vesting period if the employee is retirement eligible on the date of grant or will become retirement eligible before the end of the vesting period.

Changes in the balance of AOCL, net of tax, consisted of the following (in millions):



	Postretirement Benefit Plans		Other, net		AOCL
Balance at December 31, 2020	$	(16,155)	$	34	$	(16,121)
Other comprehensive income before reclassifications	0		2		2
Amounts reclassified from AOCL
Recognition of net actuarial losses (a)	408		—		408
Amortization of net prior service credits (a)	(128)		—		(128)

Other	—		2		2
Total reclassified from AOCL	280		2		282
Total other comprehensive income	280		4		284
Balance at June 27, 2021	$	(15,875)	$	38	$	(15,837)

Balance at December 31, 2019	$	(15,528)	$	(26)	$	(15,554)
Other comprehensive income before reclassifications	0		3		3
Amounts reclassified from AOCL
Recognition of net actuarial losses (a)	344		—		344
Amortization of net prior service credits (a)	(124)		—		(124)
Other	—		(72)		(72)
Total reclassified from AOCL	220		(72)		148
Total other comprehensive income (loss)	220		(69)		151
Balance at June 28, 2020	$	(15,308)	$	(95)	$	(15,403)

Postretirement
Benefit Plans Other, net AOCL
Balance at December 31, 2019 $ (15,528) $ (26) $ (15,554)
Other comprehensive income before reclassifications — 3 3
Amounts reclassified from AOCL
Recognition of net actuarial losses ^(a)
344 — 344
Amortization of net prior service credits ^(a)
(124) — (124)
Other — (72) (72)
Total reclassified from AOCL 220 (72) 148
Total other comprehensive income 220 (69) 151
Balance at June 28, 2020 $ (15,308) $ (95) $ (15,403)
Balance at December 31, 2018 $ (14,254) $ (67) $ (14,321)
Other comprehensive income before reclassifications — 13 13
Amounts reclassified from AOCL
Recognition of net actuarial losses ^(a)
574 — 574
Amortization of net prior service credits ^(a)
(120) — (120)
Other — 15 15
Total reclassified from AOCL 454 15 469
Total other comprehensive income 454 28 482
Balance at June 30, 2019 $ (13,800) $ (39) $ (13,839)

^(a)Reclassifications from AOCL related to our postretirement benefit plans were recorded as a component of net periodic benefit ~~cost~~income for each period presented (see “Note ~~6 –~~7 - Postretirement Benefit Plans”). These amounts include ~~$110~~$140 million and ~~$227~~$110 million, net of tax, for the quarters ended June ~~28, 2020~~27, 2021 and June ~~30, 2019,~~28, 2020, which are comprised of the recognition of net actuarial losses of ~~$172~~$204 million and ~~$287~~$172 million for the quarters ended June ~~28, 2020~~27, 2021 and June ~~30, 2019~~28, 2020, and the amortization of net prior service credits of ~~$62~~$64 million and ~~$60~~$62 million for the quarters ended June ~~28, 2020~~27, 2021 and June ~~30, 2019.~~28, 2020.

Significant estimates and assumptions are made in estimating contract sales and costs, including the profit booking rate. At the outset of a long-term contract, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract, as well as variable consideration, and assess the effects of those risks on our estimates of sales and total costs to complete the contract. The estimates consider the technical requirements (e.g., a newly-developed product versus a mature product), the schedule and associated tasks (e.g., the number and type of milestone

events) and costs (e.g., material, labor, subcontractor, overhead, general and administrative and the estimated costs to fulfill our industrial cooperation agreements, sometimes referred to as offset or localization agreements, required under certain contracts with international customers). The initial profit booking rate of each contract considers risks surrounding the ability to achieve the technical requirements, schedule and costs in the initial estimated total costs to complete the contract. Profit booking rates may increase during the performance of the contract if we successfully retire risks surrounding the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract or may increase the variable consideration we expect to receive on the contract. Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase or our estimates of variable consideration we expect to receive decrease. All of the estimates are subject to change during the performance of the contract and may affect the profit booking rate. When estimates of total costs to be incurred on a contract exceed total

In addition, comparability of our segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on our contracts for which we recognize revenue over time using the percentage-of-completion cost-to-cost method to measure progress towards completion. Increases in ~~the~~ profit booking rates, typically referred to as risk retirements, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes. Segment operating profit and margin may also be impacted favorably or unfavorably by other items, which may or may not impact sales. Favorable items may include the positive resolution of contractual matters, cost recoveries on severance and restructuring charges, insurance recoveries and gains on sales of assets. Unfavorable items may include the adverse resolution of contractual matters; restructuring charges, except for significant severance actions, which are excluded from segment operating results; reserves for disputes; certain asset impairments; and losses on sales of certain assets.

Our consolidated net adjustments not related to volume, including net profit booking rate adjustments and other matters, increased segment operating profit by approximately $385 million and $880 million during the quarter and six months ended June 27, 2021 and $480 million and $945 million during the ~~quarter~~quarters and six months ended June 28, ~~2020 and $420 million and $985 million during the quarter and six months ended June 30, 2019.~~2020. These adjustments increased net earnings by approximately $304 million ($1.09 per share) and $695 million ($2.49 per share) during the quarter and six months ended June 27, 2021 and $379 million ($1.35 per share) and $747 million ($2.65 per share) during the quarter and six months ended June 28, ~~2020 and $332 million ($1.17 per share) and $778 million ($2.74 per share) during the quarter and six months ended June 30, 2019.~~2020. We recognized net sales from performance obligations satisfied in prior periods of approximately $492 million and $984 million during the quarter and six months ended June 27, 2021, and $495 million and $1.0 billion during the quarter and six months ended June 28, 2020, ~~and $560 million and $1.2 billion during the quarter and six months ended June 30, 2019,~~ which primarily relate to changes in profit booking rates that impacted revenue.

We have experienced performance issues on a classified fixed-price incentive fee contract that involves highly complex designs and systems integration at our Aeronautics business segment. During the quarter ended June 27, 2021, we completed a comprehensive review of the program with our customer, including the technical requirements, performance to date, remaining work, schedule, and estimated costs to complete the program. We also entered into negotiations with our customer, which are ongoing, about contract scope, price, and future courses of action. At the conclusion of the review and based on the current negotiations with our customer, it was determined that the total costs to complete the current phase of the program are expected to exceed the contract price. Accordingly, we recognized a loss of $225 million ($169 million, or $0.61 per share, after tax) on the program at our Aeronautics business segment during the quarter ended June 27, 2021, which represents our estimated total losses on the current phase of the program. However, we will continue to monitor our performance, any future changes in scope, and estimated costs to complete the program and may have to record additional losses in future periods if we experience further performance issues, increases in scope, or cost growth, which could be material to our operating results. In addition, we and our industry team may incur advanced procurement costs (also referred to as precontract costs) in order to achieve contract imperatives. We will monitor the recoverability of precontract costs, if any, which could be impacted by the customer’s decision regarding future phases of the program.

As previously disclosed in our ~~2019~~2020 Form 10-K, we are responsible for a program to design, develop and construct a ground-based radar at our RMS business ~~segment. The~~segment, and the program has experienced performance issues for which we have periodically accrued reserves. AsDuring the quarter ended June 27, 2021, we were able to retire certain risks associated with the reserves we had previously accrued which resulted in the reversal of approximately $15 million ($11 million, or $0.04 per share, after tax) of losses previously recorded. This reversal reduced cumulative losses on this program to approximately $235 million as of June ~~28, 2020, cumulative losses were approximately $240 million on this program. We~~27, 2021. However, we may continue to experience issues related to customer requirements and our performance under this contract and have to record additional charges. ~~However, based~~Based on the current amount of losses ~~previously~~ recorded and our current estimate of the sales and costs to complete the program, at this time we do not anticipate that additional losses, if any, would be material to our operating results or financial condition.

As previously disclosed in our ~~2019~~2020 Form 10-K, we have a program, EADGE-T, to design, integrate and install an air missile defense command, control, communications, computers - intelligence (C4I) system for an international customer that has experienced performance issues and for which we have periodically accrued reserves at our RMS business segment. As of June ~~28, 2020,~~27, 2021, cumulative losses remained at approximately $260 million. We continue to monitor program requirements and our performance. At this time, we do not anticipate additional charges that would be material to ~~our operating results or financial condition.~~

As previously disclosed in our 2019 Form 10-K, we have 2 commercial satellite programs at our Space business segment for which we have experienced performance issues related to the development and integration of a modernized LM 2100 satellite platform. These programs are for the delivery of 3 satellites in total, including 2 that launched in 2019 and 1 that launched in February 2020. We have periodically revised our estimated costs to complete these developmental commercial programs. As of June 28, 2020, cumulative losses remained at approximately $410 million for

As previously disclosed, ~~in our 2019 Form 10-K,~~ we ~~are responsible for designing, developing~~had a program to design, develop and ~~installing~~install an upgraded turret for the Warrior Capability Sustainment ~~Program.~~Program (“Warrior”). In ~~2018,~~March 2021, we ~~revised~~received notification from our ~~estimated costs~~customer that it had made a decision to ~~complete~~not proceed with the demonstration and manufacturing phases of the program asand we were directed to suspend work on the program. During the quarter ended June 27, 2021, we worked with our customer to develop a ~~consequence~~plan to wind down the program and entered into negotiations about final scope, milestones, remaining costs, and price. After an evaluation of ~~performance issues,~~the financial impacts of the decision to wind down the program and recorded charges at our MFC business segment. As of June 28, 2020, cumulative losses remained at approximately $140 million on this program. We may continue to experience issues related to customer requirements and our performance under this contract and may have to record additional reserves. However, based on the negotiations with the customer during the second quarter of 2021, we reversed previously recognized losses ~~already recorded~~of approximately $40 million ($30 million, or $0.11 per share, after tax) during the quarter ended June 27, 2021 to reflect the removal of terminated scope on this program, net of incremental close-out costs. This reversal reduced cumulative losses on this program to approximately $100 million as of June 27, 2021. Negotiations with our customer and ~~our current estimate~~the wind down of the ~~sales and costs to complete the~~ program ~~at this time we do not anticipate that additional losses, if any, would be material to our operating results or financial condition.~~

As of June 28, 2020, we owned 40% of AMMROC, a joint venture located in the United Arab Emirates. We account for our investment in AMMROC using the equity method. AMMROC provides maintenance, repair and overhaul (MRO) and support services for fixed and rotary wing military aircraft in the South Asia, Middle East and North Africa (SAMENA) region. To date, substantially all of AMMROC’s business was dependent on a single customer contract to provide performance based logistics (PBL) services that was in the process of being re-competed. In April 2020, the customer awarded the contract to a competitor. As a result of the loss of this customer contract, we performed a strategic review of AMMROC’s business and evaluated various options for our investment. In July 2020, we executed an agreement to sell our investment in AMMROC to our joint venture partner for $307 million. The transaction, which is subject to closing conditions, isare expected to ~~close in~~be completed during the third quarter of ~~2020 and the purchase price will be paid in cash installments through September~~ 2021. Accordingly, we adjusted the carrying value of our investment from $435 million to the expected selling price of $307 million as of June 28, 2020, which resulted in the recognition of a noncash impairment charge of $128 million ($96 million, or $0.34 per share, after tax) in our results of operations for the quarter ended June 28, 2020.

Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. Our backlog includes both funded (firm orders for our products and services for which funding has been both authorized and appropriated by the customer) and unfunded (firm orders for which funding has not been appropriated) amounts. We do not include unexercised options or potential orders under indefinite-delivery, indefinite-quantity agreements in our backlog. For our cost-reimbursable and fixed-priced-incentive contracts, the estimated consideration we expect to receive pursuant to the terms of the contract may exceed the contractual award amount. The estimated consideration is determined at the outset of the contract and is continuously reviewed throughout the contract period. In determining the estimated consideration, we consider the risks related to the technical, schedule and cost impacts to complete the contract and an estimate of any variable consideration. Periodically, we review these risks and may increase or decrease backlog accordingly. As the risks on such contracts are successfully retired, the estimated consideration from customers may be reduced, resulting in a reduction of backlog without a corresponding recognition of sales. As of June ~~28, 2020,~~27, 2021, our ending backlog was ~~$150.3~~$141.7 billion. We expect to recognize approximately ~~37%~~39% of our backlog over the next 12 months and approximately 61% over the next 24 months as revenue with the remainder recognized thereafter.

Through our Lockheed Martin Ventures Fund, we make strategic investments in certain early stage companies that we believe are advancing or developing new technologies applicable to our business. These investments may be in the form of common or preferred stock, warrants, convertible debt securities or investments in funds. Most of the investments are in equity securities without readily determinable fair values, which are measured initially at cost and are then adjusted to fair value only if there is an observable price change or reduced for impairment, if applicable. Investments with quoted market prices in active markets are recorded at fair value at the end of each reporting period. The carrying amounts of investments held in our Lockheed Martin Ventures Fund were $240 million and $173 million at June 27, 2021 and December 31, 2020. During the quarter and six months ended June 27, 2021, we recorded $14 million ($11 million, or $0.04 per share, after tax) and $82 million ($62 million, or $0.22 per share, after tax) of net gains due to sales of investments and changes in value which are reflected in other non-operating income, net in our consolidated statements of earnings.

Our effective income tax rate was 16.4% and 16.6% for the quarters and six months ended June 27, 2021, and 17.1% and 16.3% for the ~~quarter~~quarters and six months ended June 28, ~~2020, and 15.6% and 13.9% for the quarter and six months ended June 30, 2019.~~2020. The ~~higher~~ rate for the second quarter ~~ended June 28,~~of 2021 is lower than the second quarter of 2020 is primarily due to ~~a decrease in~~increased tax deductions for foreign derived intangible income. The rate for the six months ended June 27, 2021 is higher than the six months ended June 28, 2020 primarily due to decreased tax deductions for employee equity awards. The rates for ~~all~~both periods benefited from ~~the research and development tax credit,~~ tax deductions for foreign derived intangible income, ~~related to direct commercial sales,~~the research and development tax credit, and dividends paid to the corporation's defined contribution plans with an employee stock ownership plan ~~feature, and tax deductions for employee equity awards.~~

The rates for all periods also benefited from additional tax deductions based on proposed tax regulations released on March 4, 2019, which clarified that foreign military sales qualify for foreign derived intangible income treatment. On July 9, 2020, the U.S. Treasury Department issued final tax regulations related to foreign derived intangible income. The final tax regulations confirm foreign military sales qualify for foreign derived intangible income treatment. We continue to assess the other effects of the final regulations.feature.

~~On May 20,~~During the first quarter of 2021, we recorded severance and restructuring charges of $36 million ($28 million, or $0.10 per share, after tax) associated with plans to close and consolidate certain facilities and reduce total workforce within our RMS business segment. The actions were taken to better align RMS' organization and cost structure to improve the efficiency of its operations and affordability of its products and services. Upon separation, terminated employees were to receive lump-sum severance payments primarily based on years of service, the majority of which will be paid over the next several quarters.

In July 2020, we ~~issued~~entered into an agreement to sell our ownership interest in AMMROC to our joint venture partner for $307 million. As a ~~total~~result, we adjusted the carrying value of $1.2 billion of senior unsecured notes, consisting of $400 million aggregate principal amount of 1.85% Notes due in 2030 (the “2030 Notes”) and $750 million aggregate principal amount of 2.80% Notes due in 2050 (the “2050 Notes” and, together with the 2030 Notes, the “Notes”). The 2030 Notes mature on June 15, 2030 and the 2050 Notes mature on June 15, 2050. We will pay interest on the Notes semi-annually in arrears on June 15 and December 15 of each year beginning on December 15, 2020. We may, at our ~~option, redeem the Notes of any series in whole or in part at any time and from time to time at a redemption price equal~~investment to the ~~greater~~selling price of ~~100%~~$307 million, which resulted in the recognition of ~~the principal amount~~a noncash impairment charge of ~~the notes to be redeemed~~$128 million ($96 million, or ~~an applicable “make-whole” amount, plus accrued and unpaid interest to the date of redemption.~~

On occasion, our customers may seek deferred payment terms to purchase our products. In connection with these transactions, we may, at our customer’s request, enter into arrangements for the non-recourse sale of customer receivables to unrelated third-party financial institutions. For accounting purposes, these transactions are not discounted and are treated as a sale of receivables as we have no continuing involvement. The sale proceeds from the financial institutions are reflected$0.34 per share, after tax) in our ~~operating cash flows on the statement~~results of ~~cash flows. We sold customer receivables of $121 million and $267 million~~operations during the quarter ~~and six months~~ ended June 28, ~~2020 and $96~~2020. The sale was completed on November 25, 2020. The purchase price was required to be paid in cash installments in 2021, of which we have received $231 million ~~and $200 million during the quarter and six months ended June 30, 2019. There were 0 gains or losses related~~ to ~~sales~~date. The remaining outstanding installment payment, which is due in late 2021, is guaranteed by an irrevocable letter of ~~these receivables.~~credit issued by a third-party financial institution.

In 2017, the United Kingdom’s Financial Conduct Authority (FCA) announced that after 2021 it would no longercompel banks to submit the rates required to calculate the London Interbank Offered Rate (LIBOR) ~~and other interbank offered rates,~~, which have been widely used as reference rates for various securities and financial contracts, including loans, debt and derivatives. This announcement indicates that the continuation of LIBOR on the current basis is not guaranteed after 2021. Subsequently in March 2021, the FCA announced some USD LIBOR tenors (overnight, 1 month, 3 month, 6 month and 12 month) will continue to be published until June 30, 2023. Regulators in the U.S. and other jurisdictions have been working to replace these rates with alternative reference interest rates that are supported by transactions in liquid and observable markets, such as the Secured Overnight Financing Rate (SOFR). for USD LIBOR. Currently, our credit facility and certain of our ~~debt and~~ derivative instruments reference LIBOR-based rates. The discontinuation of LIBOR will require these arrangements to be modified in order to replace LIBOR with an alternative reference interest ~~rate, which could impact our future cost of funds.~~rate. Our credit facility includes a provision for the determination of a successor LIBOR ~~rate.~~

~~In March~~rate; and we have adhered to the ISDA 2020 IBOR Fallbacks Protocol, which will govern our derivatives upon the ~~FASB issued~~final cessation of USD LIBOR. ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, ~~which temporarily simplifies~~as amended, helps limit the accounting ~~for~~impact from contract modifications, including hedging relationships, due to the transition from LIBOR ~~and other interbank offered rates~~ to alternative reference ~~interest rates. For example, entities can elect not to remeasure the contracts at the modification date or reassess a previous accounting determination if certain conditions~~rates that are ~~met. Additionally, entities can elect to continue applying hedge accounting for hedging relationships affected~~completed by ~~reference rate reform if certain conditions are met. The new standard was effective upon issuance and generally can be applied to applicable contract modifications through~~ December 31, 2022. We ~~are currently evaluating the impact of the transition from LIBOR to alternative reference interest rates, but~~ do not expect a significant impact to our operating results, financial position or cash ~~flows.~~flows from the transition from LIBOR to alternative reference interest rates, but we will continue to monitor the impact of this transition until it is completed.

We have reviewed the accompanying consolidated balance sheet of Lockheed Martin Corporation (the Corporation) as of June ~~28, 2020,~~27, 2021, the related consolidated statements of earnings, comprehensive income and equity for the quarters and six months ended June 27, 2021 and June 28, 2020 ~~and June 30, 2019~~, and consolidated statements of cash flows for the six months ended June 27, 2021 and June 28, 2020, and ~~June 30, 2019, and~~ the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Corporation as of December 31, ~~2019,~~2020, the related consolidated statements of earnings, comprehensive income, cash flows and equity for the year then ended, and the related notes (not presented herein); and in our report dated ~~February 7, 2020,~~January 28, 2021, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, ~~2019,~~2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

These financial statements are the responsibility of the Corporation’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

We are a global security and aerospace company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. We also provide a broad range of management, engineering, technical, scientific, logistics, system integration and cybersecurity services. We serve both U.S. and international customers with products and services that have defense, civil and commercial applications, with our principal customers being agencies of the U.S. Government. During the six months ended June ~~28, 2020, 76%~~27, 2021, 72% of our ~~$32~~$33.3 billion in net sales were from the U.S. Government, either as a prime contractor or as a subcontractor (including ~~66%~~63% from the Department of Defense (DoD)), ~~23%~~27% were from international customers (including foreign military sales (FMS) contracted through the U.S. Government) and 1% were from U.S. commercial and other customers. Our main areas of focus are in defense, space, intelligence, homeland security and information technology, including cybersecurity.

The ~~global outbreak of the coronavirus disease 2019 (COVID-19) was declared a~~COVID-19 pandemic ~~by the World Health Organization and a national emergency by the U.S. Government~~continues to present business challenges in March 2020 and has negatively affected the U.S. and global economies, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place” and quarantine restrictions, and created significant disruption of the financial markets.2021. We have ~~taken measures~~initiated a plan to ~~protect~~reintroduce employees to the ~~health~~workplace as vaccine rates increase and ~~safety~~COVID-19 cases decrease. Although we have not yet returned to pre-pandemic operations, we are experiencing stabilization of our ~~employees, work with our customers~~employee attendance and ~~suppliers~~supply chain deliveries. During the first six months of 2021, we continued to ~~minimize disruptions and support our community in addressing the challenges posed by this ongoing global pandemic. The pandemic has presented unprecedented business challenges, and we have experienced~~experience impacts in each of our business areas related to COVID-19, primarily in continued increased coronavirus-related costs, delays in supplier deliveries, impacts of travel restrictions, site access ~~to some locations,~~and quarantine restrictions, and the impacts of remote work and adjusted work schedules.

~~Despite these challenges, Lockheed Martin~~ We continued to take measures to protect the health and safety of our employees, including measures to facilitate the provision of vaccines to our employees in line with state and local guidelines. We also continued to work with our customers and suppliers to minimize disruptions, including using accelerated progress payments from the U.S. ~~Government’s pro-active efforts, especially with regard~~Government to accelerate $1.4 billion of payments to our suppliers as of June 27, 2021 that are due by their terms in future periods. We expect to continue accelerating payments to our suppliers through at least the ~~supply chain, helped to partially mitigate~~end of 2021.

Although the ~~disruptions caused by~~ COVID-19 ~~on our operations in the second quarter. In addition, favorable contract award timing and strong performance more than offset the impacts of COVID-19~~pandemic did not have a significant impact on our financial results in the first ~~half~~six months of ~~2020. However,~~2021, the ultimate impact of COVID-19 on our operations and financial performance in ~~2020 and~~ future periods, including our ability to execute our programs in the expected timeframe, remains uncertain and will depend on future pandemic related developments, including the duration ~~and spread~~ of the pandemic, any potential subsequent waves of COVID-19 infection, the effectiveness, distribution and acceptance of COVID-19 vaccines, and related ~~actions taken by the U.S. Government, state and local~~ government ~~officials, and international governments~~actions to prevent and manage disease spread, all of which are uncertain and cannot be predicted. The long-term impacts of COVID-19 on government budgets and other funding priorities, including international priorities, that impact demand for our products and services ~~and our business~~ are also difficult to ~~predict.~~predict but could negatively affect our future results and business operations. For additional risks to the corporation related to the COVID-19 pandemic, see ~~“Part II,~~ Item ~~1A.~~1A, Risk ~~Factors.”~~

~~In accordance with the Department~~Factors of ~~Homeland Security’s identification of the Defense Industrial Base as a critical infrastructure sector in March 2020,~~ our U.S. production facilities have continued to operate in support of essential products and services required to meet national security commitments to the U.S. Government and the U.S. military. Although we are designated as a critical infrastructure workforce, operations have been adjusted in response to the pandemic, including, most significantly, a reduction in the F-35 production rate due primarily to supplier delays and a temporary schedule adjustmentAnnual Report on Form 10-K for the F-35 production workforce in Fort Worth, Texas, and additional production delays, facility closures, work slowdowns, or temporary stoppages could occur. In addition, other countries have different practices and policies that can affect our international operations and the operations of our suppliers and customers. For example, we had a brief pause in operations at the F-35 Final Assembly and Check Out (FACO) facilities in Japan and Italy in March in observance of such countries’ COVID-19 policies. Additional closures could occur, and base closures, travel restrictions, and quarantine requirements both within and outside the U.S. have affected our business. In many cases facilities are not operating under full staffing as a result of COVID-19, which could have an indeterminate longer-term impact. Flight test operations and training are being impacted by travel restrictions as a result of COVID-19, which has delayed some deliveries to customers, although we have worked to mitigate these impacts. We also have some limited operations that are not designated as critical infrastructure and therefore have been mandated to close or operate at only minimum basic operations. However, these closures to date have not been material to our operating results or financial condition.year ended December 31, 2020 (2020 Form 10-K).

The U.S. Government has taken actions in response to COVID-19 to increase the progress payment rates in new and existing contracts and accelerate contract awards to provide cash flow and liquidity for companies in the Defense Industrial Base, including large prime contractors like Lockheed Martin and smaller suppliers. We continue to proactively monitor our supply chain and have implemented multiple actions to help mitigate the effects of COVID-19, including accelerating payments to suppliers within our global supply base as a result of the actions taken by the DoD in changing the progress payment policy. We plan to continue to accelerate payments to the supply chain for the remainder of the year in order to mitigate COVID-19 risks, prioritizing impacted suppliers and small businesses. As described in Item 1A, Risk Factors of our Annual Report on Form 10-K, we rely on other companies and the U.S. Government to provide materials, major components and products, and to perform a portion of the services that are provided to our customers under the terms of most of our contracts. Many of these suppliers also supply parts for commercial aviation businesses which have been more significantly impacted by the pandemic due to the impacts on these markets. Global supply chain disruption caused by the response to COVID-19 could impact our ability to perform on our contracts. We have identified a number of suppliers that have had potential delivery impacts due to COVID-19 and are working to manage those impacts. However, if we are not able to implement alternatives or other mitigations, deliveries and other milestones on affected programs could be adversely impacted.

Our work in production facilities and labs has continued, consistent with guidance from federal, state and local officials to minimize the spread of COVID-19. We have taken actions to equip employees with personal protective equipment, establish minimum staffing and social distancing policies, sanitize workspaces more frequently, adopt alternate work schedules and institute other measures aimed to sustain production and related services while minimizing the transmission of COVID-19. In addition, we have implemented a flexible teleworking policy for employees who can meet our customer commitments remotely, and a significant portion of our workforce is currently teleworking. Given the nature of the pandemic, it remains uncertain when and on what scale teleworking employees will return to work in person. We have not previously experienced such a significant portion of our workforce working remotely for a prolonged period, so its effects on our long-term operations are unknown.

Coronavirus-related costs for us and our suppliers could be significant and we are seeking reimbursement of coronavirus-related costs under our U.S. Government contracts through a combination of equitable adjustments to the contract price and reimbursement of the costs under Section 3610 of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), which allows federal agencies to reimburse contractors at the minimum applicable contract billing rate for costs arising from certain paid leave, including sick leave, a contractor provides to keep its employees or subcontractors in a ready state, including to protect the life and safety of government and contractor personnel through September 30, 2020. Reimbursement of any costs under Section 3610 of the CARES Act increases sales, but is not expected to be at a profit or fee and so would have the effect of reducing our margins in future periods. These cost increases, including costs for employees whose jobs cannot be performed remotely, may not be fully recoverable under our contracts, particularly fixed-price contracts, or adequately covered by insurance. We also have no assurance that Congress will appropriate funds to cover the reimbursement of defense contractors authorized by the CARES Act, which could reduce funds available for other U.S. Government defense priorities. We also are deferring certain payroll taxes as provided for in the CARES Act, which has the effect of increasing our cash from operations in 2020, but reducing cash from operations in 2021 and 2022.

We expect our ~~2020~~2021 net sales to increase in the ~~high-single~~mid-single digit range from ~~2019~~2020 levels. The projected growth is driven by ~~increased volume at all four business areas. Specifically, the increased growth is driven by the~~ F-35, ~~program~~F-16 and classified programs at Aeronautics, increased ~~production rate~~ volume ~~in the tactical and strike missiles and~~within integrated air and missile defense ~~businesses~~programs at MFC, increased volume on Sikorsky ~~volume~~helicopter programs and training and logistics solutions programs at RMS, and ~~Next Generation Overhead Persistent Infrared (Next Gen OPIR) and Hypersonics~~hypersonics volume (including the acquisition of Integration Innovation Inc.’s (i3) hypersonics portfolio) at Space. Total business segment operating profit margin in ~~2020~~2021 is expected to be approximately ~~10.9%~~11.0%; and cash from operations is expected to be greater than or equal to ~~$8.0 billion. We updated~~$8.9 billion, with no pension contributions.

Our 2021 outlook reflects the UK Ministry of Defence’s renationalization of the Atomic Weapons Establishment (AWE) program on June 30, 2021. It does not incorporate the pending acquisition of Aerojet Rocketdyne Holdings, Inc. or potential pension risk transfer transactions. The outlook for 2021 assumes continued support and funding of our ~~2020~~programs, known impacts of COVID-19, and a statutory tax rate of 21%. Our 2021 outlook ~~based on~~also reflects the impact of net gains from investments held by the Lockheed Martin Ventures Fund recognized in the first six months of 2021, but does not include any future gains or losses related to market volatility and changes in valuations of our ~~year to date results~~investment holdings. Additionally, it assumes that there will not be significant reductions in customer budgets, changes in funding priorities and ~~expectations~~that the U.S. Government will not operate under a continuing resolution for ~~the remainder of 2020.~~ an extended period in which new contract and program starts are restricted.

among other things, that our production facilities continue to operate and we do not experience significant work stoppages or closures, we are able to mitigate any supply chain disruptions and these do not worsen, and we are able to recover our costs under U.S. Government contracts and government funding priorities do not change. While these are our current assumptions for our 2020 outlook, they could change as described above. Risk related to these items are described below and under Item 1A, Risk Factors.from operations.

On ~~February 10, 2020,~~May 28, 2021, the Administration submitted to Congress the President’s fiscal year (FY) 2022 budget request, which proposes $753 billion for total national defense spending including $715 billion for the Department of Defense (DoD), a 1.6% increase above the FY 2021 ~~President’s Budget, requesting $1.34 trillion in~~enacted amounts for both total ~~discretionary funding~~national defense and the DoD (a U.S. Government fiscal year starts on October 1 and ends on September 30). This is the first budget over the past decade that is not restricted by the discretionary spending caps under the Budget Control Act of 2011. The budget also proposes to end the use of Overseas Contingency Operations (OCO) as a separate fund to finance overseas operations. In the coming months, Congress will need to approve or revise the President’s FY 2022 budget proposal through enactment of appropriations bills and other policy legislation, which would then require final approval from the President in order for the FY 2022 budget to become law and complete the budget process.

In addition to the FY 2022 budget, the U.S. Government continues to face a variety of fiscal and monetary policy issues, including rising debt levels. The legal limit on U.S. debt, commonly known as the debt ceiling, will be reinstated on August 1, 2021, ~~budget requests $672 billion for base discretionary national defense spending,~~after a two-year suspension. On August 2, 2019, with the ~~maximum permitted under~~passage of the Bipartisan Budget Act of 2019 (BBA-19)~~. The total national defense request~~, Congress suspended the debt ceiling through July 31, 2021, at which time the debt limit will be increased to the amount of U.S. Government debt outstanding on that date. If the debt ceiling is ~~$741 billion, which includes $69 billion requested~~not raised or suspended again, the Department of Treasury is expected to employ extraordinary measures to continue financing the U.S. Government while avoiding exceeding the debt limit. It is expected, however, that the U.S. Government will exhaust these available measures in late summer or early fall of 2021, and Congress will need to raise the debt limit in order for ~~Overseas Contingency Operations (OCO). OCO~~the U.S. Government to continue borrowing money. If the debt ceiling is not raised, the U.S. Government may not be able to pay for expenditures or fulfill its funding ~~does not count toward~~obligations and there could be significant disruption to all discretionary ~~spending caps.~~ programs.

~~On March 27, 2020,~~homeland security programs would receive priority, the ~~President signed the CARES Act, the bipartisan $2 trillion economic relief package aimed~~effect on individual programs or Lockheed Martin cannot be predicted at helping American workers and businesses impacted by the COVID-19 pandemic. The bill includes $10.4 billion for DoD to fund COVID-19 response related expenses in defense health programs, operations, and the Defense Procurement Act fund. The funding is identified as emergency and is exempt from the discretionary spending limits of the Budget Control Act of 2011 (BCA).this time.

Our operating cycle is primarily long-term and involves many types of contracts for the design, development and manufacture of products and related activities with varying delivery schedules. Consequently, the results of operations of a particular period, or period-to-period comparisons of sales and profits, may not be indicative of future operating results. The following discussions of comparative results among periods should be reviewed in this context. All per share amounts cited in these discussions are presented on a “per diluted share” basis, unless otherwise noted. Our consolidated results of operations were as follows (in millions, except per share data):

Quarters Ended Six Months Ended
June 28,
2020 June 30,
2019 June 28,
2020 June 30,
2019
Products $ 13,572 $ 12,003 $ 26,738 $ 23,973
% of total net sales 83.7 % 83.2 % 83.9 % 83.3 %
Services 2,648 2,424 5,133 4,790
% of total net sales 16.3 % 16.8 % 16.1 % 16.7 %
Total net sales $ 16,220 $ 14,427 $ 31,871 $ 28,763


	Quarters Ended						Six Months Ended
	June 27, 2021			June 28, 2020			June 27, 2021			June 28, 2020
Products	$	14,258		$	13,572		$	28,011		$	26,738
% of total net sales	83.7		%	83.7		%	84.1		%	83.9		%
Services	2,771			2,648			5,276			5,133
% of total net sales	16.3		%	16.3		%	15.9		%	16.1		%
Total net sales	$	17,029		$	16,220		$	33,287		$	31,871

Substantially all of our contracts are accounted for using the percentage-of-completion cost-to-cost method. Under the percentage-of-completion cost-to-cost method, we record net sales on contracts over time based upon our progress towards completion on a particular contract, as well as our estimate of the profit to be earned at completion. The following discussion of material changes in our consolidated net sales should be read in tandem with the subsequent discussion of changes in our consolidated cost of sales and our business segment results of operations because changes in our sales are typically accompanied by a corresponding change in our cost of sales due to the nature of the percentage-of-completion cost-to-cost method.

primarily due to higher volume on the Atomic Weapons Establishment (AWE) program, a next generation missile-warning satellite program (Next Gen OPIR) and hypersonic development programs. The increase in product sales at MFC was primarily due to increased volume for tactical and strike missile programs (primarily Army Tactical Missile System (ATACMS)). The increase in product sales at RMS was attributable to higher production volume on Sikorsky helicopter programs (Black Hawk and Combat Rescue Helicopter (CRH)), partially offset by lower volume for various integrated warfare systems and sensors (IWSS) programs. The increase in product sales at Aeronautics was primarily due to higher production volume for the ~~F-35~~F-16 program.

Product sales increased $1.3 billion, or 5%, during the six months ended June 27, 2021 compared to the same period in 2020. The increase in product sales was primarily due to higher product sales of approximately $430 million at Space, $425 million at RMS, $285 million at MFC, and $135 million at Aeronautics. The increase in product sales at Space was primarily due to higher volume on the AWE program, a next generation missile-warning satellite program (Next Gen OPIR) and ~~classified contracts.~~hypersonic development programs. The increase in product sales at RMS was attributable to higher production volume on Sikorsky helicopter programs (Black Hawk, CH-53K and CRH) and higher net sales for training and logistics solutions programs, partially offset by lower volume on various IWSS programs. The increase in product sales at MFC was primarily due to increased volume for ~~integrated air and missile defense programs (primarily Patriot Advanced Capability-3 (PAC-3) and Terminal High Altitude Area Defense (THAAD)) and increased volume for~~various tactical and strike missile ~~programs (primarily Guided Multiple Launch Rocket System (GMLRS) and High-Mobility Artillery Rocket Systems (HIMARS)).~~programs. The increase in product sales at Aeronautics was primarily due to higher volume on classified contracts and higher production volume on the F-16 program, partially offset by lower production volume on the F-35 program.

Service sales increased $123 million, or 5%, during the quarter ended June 27, 2021 compared to the same period in 2020. The increase in service sales was primarily due to higher sales of approximately $95 million at RMS and $55 million at Aeronautics, partially offset by lower sales of $20 million at Space. The increase in service sales at RMS was primarily due to higher volume for Sikorsky helicopter programs (primarily a Seahawk sustainment program) and various IWSS programs. The increase in service sales at Aeronautics was primarily due to higher sustainment volume for the F-35 and C-130 programs, partially offset by lower sustainment volume on the F-22 program. The decrease in service sales at Space was primarily due to various national security space programs.

Service sales increased $143 million, or 3%, during the six months ended June 27, 2021 compared to the same period in 2020. The increase in service sales was primarily due to higher sales of approximately $140 million at RMS and $50 million at Aeronautics, partially offset by lower sales of $35 million at Space. The increase in service sales at RMS was primarily due to higher volume for Sikorsky helicopter programs (primarily a Seahawk ~~production~~sustainment program) and various IWSS programs. The increase in service sales at Aeronautics was primarily due to higher sustainment volume for the F-35 and C-130 programs, ~~and VH-92A production contracts).~~partially offset by lower sustainment volume on the F-22 program. The decrease in service sales at Space was primarily due to various national security space programs.

Product sales increased $2.8 billion, or 12%, during the six months ended June 28, 2020 compared to the same period in 2019. The increase in product sales was primarily due to higher product sales of approximately $1.4 billion at Aeronautics, $820 million at MFC and $390 million at Space. The increase in product sales at Aeronautics was primarily due to higher production volume for the F-35 program and higher volume on classified contracts. The increase in product sales at MFC was primarily due to increased volume for integrated air and missile defense programs (primarily THAAD and PAC-3; increased volume for tactical and strike missile programs (primarily GMLRS, hypersonic development programs and HIMARS). The increase in product sales at Space was primarily due to higher volume for strategic and missile defense programs (primarily hypersonic development programs) and for government satellite programs due to higher volume (primarily Next Gen OPIR).

Cost of sales, for both products and services, consist of materials, labor, subcontracting costs and an allocation of indirect costs (overhead and general and administrative), as well as the costs to fulfill our industrial cooperation agreements, sometimes referred to as offset agreements, required under certain contracts with international customers. For each of our contracts, we monitor the nature and amount of costs at the contract level, which form the basis for estimating our total costs to complete the contract. Our consolidated cost of sales were as follows (in millions):

Quarters Ended Six Months Ended
June 28,
2020 June 30,
2019 June 28,
2020 June 30,
2019
Cost of sales – products $ (12,092) $ (10,674) $ (23,834) $ (21,299)
% of product sales 89.1 % 88.9 % 89.1 % 88.8 %
Cost of sales – services (2,339) (2,194) (4,552) (4,241)
% of service sales 88.3 % 90.5 % 88.7 % 88.5 %
Other unallocated, net 424 434 819 958
Total cost of sales $ (14,007) $ (12,434) $ (27,567) $ (24,582)



	Quarters Ended						Six Months Ended
	June 27, 2021			June 28, 2020			June 27, 2021			June 28, 2020
Cost of sales – products	$	(12,866)		$	(12,092)		$	(25,147)		$	(23,834)
% of product sales	90.2		%	89.1		%	89.8		%	89.1		%
Cost of sales – services	(2,438)			(2,339)			(4,668)			(4,552)
% of service sales	88.0		%	88.3		%	88.5		%	88.7		%
Severance and restructuring charges	—			—			(36)			—
Other unallocated, net	426			424			901			819
Total cost of sales	$	(14,878)		$	(14,007)		$	(28,950)		$	(27,567)

The following discussion of material changes in our consolidated cost of sales for products and services should be read in tandem with the preceding discussion of changes in our consolidated net sales and our business segment results of operations. Except for ~~impacts of COVID-19;~~ potential impacts to our programs ~~including the F-35 program,~~ resulting from ~~U.S. Government actions related to Turkey; and projected FAS pension income in 2020 as a result of completing the planned freeze of our salaried pension plans effective January 1, 2020,~~COVID-19, we have not identified any additional developing trends in cost of sales for products and services that would have a material impact on our future ~~operations (see “Other Matters” discussion below for further discussion).~~operations.

Product costs increased ~~$1.4 billion,~~$774 million, or ~~13%~~6%, during the quarter ended June ~~28, 2020~~27, 2021 compared to the same period in ~~2019.~~2020. The increase in product costs was primarily due to higher product costs of approximately ~~$620~~$330 million at Aeronautics, ~~$385~~$270 million at Space, $110 million at MFC and ~~$240~~$65 million at RMS. The increase in product costs at Aeronautics was primarily due to ~~higher~~a loss for performance issues experienced on a classified program and increased production volume for the ~~F-35~~F-16 program. The increase in product costs at Space was primarily due to higher volume for the AWE program, a next generation missile-warning satellite program (Next Gen OPIR) and ~~classified contracts.~~hypersonic development programs. The increase in product costs at MFC was primarily due to increased volume for ~~integrated air and missile defense programs (primarily THAAD and PAC-3) and increased volume for~~ tactical and strike missile programs ~~(primarily HIMARS, GMLRS and hypersonic development programs)~~(ATACMS). The increase in product costs at RMS was ~~primarily~~ attributable to higher production volume for Sikorsky helicopter programs ~~(primarily Seahawk production programs~~(Black Hawk and ~~VH-92A production contracts).~~

Product costs increased ~~$2.5~~$1.3 billion, or ~~12%~~6%, during the six months ended June ~~28, 2020~~27, 2021 compared to the same period in ~~2019.~~2020. The increase in product costs was primarily due to higher product costs of approximately ~~$1.2 billion~~$405 million at Space, $335 million at Aeronautics, ~~$745~~$335 million at ~~MFC~~RMS and ~~$440~~$240 million at ~~Space.~~MFC. The increase in product costs at Space was primarily due to higher volume for the AWE program, national security space programs (primarily Next Gen OPIR), and strategic and missile defense programs (primarily hypersonic development programs). The increase in product costs at Space was primarily due to higher volume for the AWE program, national security space programs and strategic and missile defense programs. The increase in product costs at Aeronautics was primarily due to a loss for performance issues experienced on a classified program, higher volume on classified contracts, and higher production volume on the F-16, partially offset by lower production volume on the F-35 program. The increase in product costs at RMS was primarily due to higher production volume for ~~the F-35 program~~Sikorsky helicopter programs (Black Hawk, CH-53K and ~~classified contracts.~~CRH) and higher net sales for training and logistics solutions programs, partially offset by lower volume for various IWSS programs. The increase in product costs at MFC was primarily due to increased volume for ~~integrated air and missile defense programs (primarily THAAD and PAC-3) and increased volume for~~various tactical and strike missile programs (primarily GMLRS, hypersonic development programs and HIMARS). The increase in product costs at Space was primarily attributable to government satellite programs (primarily Next Gen OPIR) and higher volume for strategic and missile defense programs (primarily hypersonic development programs).programs.

Service costs increased ~~$145~~$99 million, or 7%4%, during the quarter ended June ~~28, 2020~~27, 2021 compared to the same period in ~~2019.~~2020. The increase in service costs was primarily due to higher service costs of approximately ~~$185~~$125 million at ~~Aeronautics which were~~RMS, partially offset by lower service costs of approximately $20 million at Space. The increase in service costs at RMS was primarily due to higher ~~sustainment~~ volume for ~~the F-35, F-22~~Sikorsky helicopter programs (primarily a Seahawk sustainment program) and ~~F-16~~various IWSS programs. The decrease in service costs at Space was primarily due to various National Security Space programs.

Service costs increased ~~$311~~$116 million, or 7%3%, during the six months ended June ~~28, 2020~~27, 2021 compared to the same period in ~~2019.~~2020. The increase in service costs was primarily due to higher service costs of approximately ~~$310~~$160 million at ~~Aeronautics which were~~RMS, partially offset by lower service costs of approximately $30 million at Space. The increase in service costs at RMS was primarily due to higher ~~sustainment~~ volume for Sikorsky helicopter programs (primarily a Seahawk sustainment program) and various IWSS programs. The decrease in service costs at Space was primarily due to various national security space programs.

Other unallocated, net primarily includes the FAS/CAS operating adjustment (which represents the difference between cost accounting standards (CAS) pension cost recorded in our business segment’s results of operations and the service cost component of FAS pension ~~income (expense))~~income), stock-based compensation expense and other corporate costs. These items are not allocated to the business segments and, therefore, are not allocated to cost of sales for products or services. Other unallocated, net reduced cost of sales by $426 million and $901 million during the quarter and six months ended June 27, 2021, compared to $424 million and $819 million during the quarter and six months ended June 28, ~~2020,~~2020. Other unallocated, net during the quarter ended June 27, 2021 was comparable primarily due to fluctuations in costs associated with various corporate items, none of which were individually significant. Other unallocated, net during the six months ended June 27, 2021 was higher primarily due to an increase in our FAS/CAS operating adjustment and fluctuations in costs associated with various corporate items, none of which were individually significant.

Other income, net generally includes earnings generated by equity method investees. During the quarter and six months ended June 27, 2021, other income, net was $41 million and $37 million, compared to ~~$434~~other expense, net of $127 million and ~~$958~~$96 million during the quarter and six months ended June ~~30, 2019.~~28, 2020. Other ~~unallocated,~~income, net during the quarter and six months ended June ~~28, 2020 was lower primarily due to a decrease in our FAS/CAS operating adjustment (see “Business Segment Results of Operations” discussion below for more detail).~~

Other expense, net during the quarter and six months ended June 28, 2020, was $127 million and $96 million, compared to other income, net of $15 million and $110 million during the quarter and six months ended June 30, 2019.27, 2021 included higher earnings generated by equity method investees. Other expense, net during the quarter and six months ended June 28, 2020 included a ~~non-cash asset~~noncash impairment charge of $128 million ($96 million, or $0.34 per share, after tax) for our international equity method investee, AMMROC. Other income, net during the six months ended June 30, 2019, included a previously deferred gain of approximately $51 million ($38 million, or $0.13 per share, after tax) related to ~~properties sold in 2015 as a result of completing~~ our ~~remaining obligations.~~

~~As of June 28, 2020, we owned 40% of AMMROC, a joint venture located in the United Arab Emirates. We account for our~~previous investment in AMMROC, ~~using the equity method. AMMROC provides maintenance, repair and overhaul (MRO) and support services for fixed and rotary wing military aircraft~~which was sold in the South Asia, Middle East and North Africa (SAMENA) region. To date, substantially all of AMMROC’s business was dependent on a single customer contract to provide performance based logistics (PBL) services that was in the process of being re-competed. In April 2020 the customer awarded the contract to a competitor. As a result of the loss of this customer contract, we performed a strategic review of AMMROC’s business and evaluated various options for our investment. In July 2020, we executed an agreement to sell our investment in AMMROC to our joint venture partner for $307 million. The transaction, which is subject to closing conditions, is expected to close in the third quarter of 2020 and the purchase price will be paid in cash installments through September 2021. Accordingly, we adjusted the carrying value of our investment from $435 million to the expected selling price of $307 million as of June 28, 2020, which resulted in the recognition of a noncash impairment charge of $128 million ($96 million, or $0.34 per share, after tax)(see Note 11 - Other” included in our ~~results of operations~~Notes to Consolidated Financial Statements for ~~the quarter ended June 28, 2020.~~additional information), and lower earnings generated by equity method investees.

Other non-operating income, ~~(expense),~~ net primarily includes the non-service cost components of FAS pension and other postretirement benefit plan income ~~(expense)~~ (i.e., interest cost, expected return on plan assets, net actuarial gains or losses, ~~and~~ amortization of prior service cost or credits), and gains or losses from strategic investments in early stage companies made by our Lockheed Martin Ventures Fund (see Note 11 - Other” included in our Notes to Consolidated Financial Statements for additional information). During the quarter and six months ended June ~~28, 2020,~~27, 2021, other

non-operating income, net was $120 million and $289 million, compared to $25 million and $81 ~~million, compared to other non-operating expense, net of $162 million and $329~~ million during the quarter and six months ended June ~~30, 2019.~~28, 2020. The increase during the quarter and six months ended June ~~28, 2020~~27, 2021 was primarily due to ~~a reduction~~an increase in non-service FAS pension ~~expense~~income for our qualified defined benefit pension ~~plans.~~plans and gains from investments held in our Lockheed Martin Ventures Fund.

Our effective income tax rate was16.4% and 16.6% for the quarter and six months endedJune 27, 2021 and 17.1% and 16.3% for the quarter and six months endedJune 28, 2020 ~~and 15.6% and 13.9% for the quarter and six months ended June 30, 2019.~~ .The ~~higher~~ rate for the second quarter ~~ended June 28,~~of 2021 is lower than the second quarter of 2020 is primarily due to ~~a decrease in~~increased tax deductions for foreign derived intangible income. The rate for the six months ended June 27, 2021 is higher than the six months ended June 28, 2020 primarily due to decreased tax deductions for employee equity awards. The rates for ~~all~~both periods benefited from ~~the research and development tax credit,~~ tax deductions for foreign derived intangible income, ~~related to direct commercial sales,~~the research and development tax credit, and dividends paid to the corporation's defined contribution plans with an employee stock ownership plan ~~feature, and tax deductions for employee equity awards.~~feature.

Changes in U.S. ~~federal~~(federal or state) or foreign tax laws and regulations, or their interpretation and application, including those with retroactive effect, including the amortization for research or experimental expenditures, could significantly impact our provision for income taxes, the amount of taxes payable, our deferred tax asset and liability balances, and stockholders’ equity. Recent proposals to increase the U.S. corporate income tax rate would require us to increase our net deferred tax assets upon enactment of new tax legislation, with a corresponding material, one-time, noncash decrease in income tax expense, but our income tax expense and payments would be materially increased in subsequent years. Our net deferred tax assets were $3.4 billion and $3.5 billion at June 27, 2021 and December 31, 2020, based on a 21% federal statutory income tax rate, and primarily relate to our postretirement benefit plans. If legislation increasing the federal statutory income tax rate to 28% had been enacted at June 27, 2021, our net deferred tax assets would have been increased by $1.1 billion and we would have recorded a corresponding one-time, noncash increase in income tax benefit of $1.1 billion. The amount of net deferred tax assets will change periodically based on several factors, including the measurement of our postretirement benefit plan obligations and actual cash contributions to our postretirement benefit plans.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures currently and requires taxpayers to amortize them over five years. While it is possible that Congress may modify or repeal this provision before it takes effect and we continue to have ongoing discussions with members of Congress, both on our own and with other industries through coalitions, we have no assurance that these provisions will be modified or repealed. Furthermore, we are continuing to work with our advisors to refine our legal interpretation of this provision prior to implementation in 2022. If these provisions are not repealed and based on current interpretations of the law, initially this would materially decrease our cash from operations based on current assumptions in 2022 by approximately $2.0 billion; and increase our net deferred tax assets by a similar amount. The largest impact would be on 2022 cash from operations, which would depend on the amount of research and development expenses paid or incurred in 2022 and other factors. The impact, however, would continue over the five year amortization period but would decrease over the period and be immaterial in year six. The amount of net deferred tax assets will change periodically based on several factors, including the measurement of our postretirement benefit plan obligations, actual cash contributions to our postretirement benefit plans, and future changes in tax laws. In addition, we are regularly under audit or examination by tax authorities, including foreign tax ~~authorities.~~authorities (including in, amongst others, Australia, Canada, India, Italy, Japan, Poland, and the United Kingdom). The final determination of tax audits and any related litigation could similarly result in unanticipated increases in our tax expense and affect profitability and cash flows.

We reported net earnings of $1.8 billion ($6.52 per share) and $3.7 billion ($13.08 per share) during the quarter and six months ended June 27, 2021, compared to $1.6 billion ($5.79 per share) and $3.3 billion ($11.87 per share) during the quarter and six months ended June 28, ~~2020, compared to $1.4 billion ($5.00 per share) and $3.1 billion ($11.00 per share) during the quarter and six months ended June 30, 2019.~~2020. Both net earnings and earnings per share were affected by the $225 million ($169 million, or $0.61 per share, after tax) loss for performance issues experienced on a classified program at our Aeronautics business segment and other factors mentioned above. Earnings per share also benefited from a net decrease of approximately ~~2.7~~2.8 million shares outstanding from June ~~30, 2019~~28, 2020 to June ~~28, 2020~~27, 2021 as a result of share repurchases, partially offset by share issuance under our stock-based awards and certain defined contribution plans.

Business segment operating profit also 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~~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, retiree benefits, significant severance actions, significant asset impairments, gains or losses from divestitures, and other miscellaneous corporate activities.



	Quarters Ended				Six Months Ended
	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020
Net sales
Aeronautics	$	6,666	$	6,503	$	13,053	$	12,872
Missiles and Fire Control	2,944		2,801		5,693		5,420
Rotary and Mission Systems	4,242		4,039		8,349		7,785
Space	3,177		2,877		6,192		5,794
Total net sales	$	17,029	$	16,220	$	33,287	$	31,871
Operating profit
Aeronautics	$	572	$	739	$	1,265	$	1,411
Missiles and Fire Control	401		370		797		766
Rotary and Mission Systems	458		429		891		805
Space	335		252		562		533
Total business segment operating profit	1,766		1,790		3,515		3,515
Unallocated items
FAS/CAS operating adjustment	489		469		978		938
Stock-based compensation	(80)		(73)		(127)		(115)

Severance and restructuring charges	—		—		(36)		—
Other, net	17		(100)		44		(130)
Total unallocated items	426		296		859		693
Total consolidated operating profit	$	2,192	$	2,086	$	4,374	$	4,208

Our total net FAS/CAS pension adjustment for the quarters and six months ended June 27, 2021 and June 28, 2020, including the service and non-service cost components of FAS pension income for our qualified defined benefit pension plans, were as follows (in millions):



	Quarters Ended				Six Months Ended
	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020
Total FAS income and CAS costs
FAS pension income	$	67	$	29	$	133	$	59
Less: CAS pension cost	516		495		1,032		989
Net FAS/CAS pension adjustment	$	583	$	524	$	1,165	$	1,048

Service and non-service cost reconciliation
FAS pension service cost	$	(27)	$	(26)	$	(54)	$	(51)
Less: CAS pension cost	516		495		1,032		989
FAS/CAS operating adjustment	489		469		978		938
Non-operating FAS pension income	94		55		187		110
Net FAS/CAS pension adjustment	$	583	$	524	$	1,165	$	1,048

Management evaluates performance on our contracts by focusing on net sales and operating profit and not by type or amount of operating expense. Consequently, our discussion of business segment performance focuses on net sales and operating profit, consistent with our approach for managing the business. This approach is consistent throughout the life cycle of our contracts, as management assesses the bidding of each contract by focusing on net sales and operating profit and monitors performance on our contracts in a similar manner through their completion.

We regularly provide customers with reports of our costs as the contract progresses. The cost information in the reports is accumulated in a manner specified by the requirements of each contract. For example, cost data provided to a customer for a product would typically align to the subcomponents of that product (such as a wing-box on an aircraft) and for services would align to the type of work being performed (such as aircraft sustainment). Our contracts generally allow for the recovery of costs in the pricing of our products and services. Most of our contracts are bid and negotiated with our customers under circumstances in which we are required to disclose our estimated total costs to provide the product or service. This approach for negotiating contracts with our U.S. Government customers generally allows for recovery of our actual costs plus a reasonable profit margin. We also may enter into long-term supply contracts for certain materials or components to coincide with the production schedule of certain products and to ensure their availability at known unit prices.

Many of our contracts span several years and include highly complex technical requirements. At the outset of a contract, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract and assess the effects of those risks on our estimates of total costs to complete the contract. The estimates consider the technical requirements (e.g., a newly-developed product versus a mature product), the schedule and associated tasks (e.g., the number and type of milestone events) and costs (e.g., material, labor, subcontractor, overhead and the estimated costs to fulfill our industrial cooperation agreements, sometimes referred to as offset agreements, required under certain contracts with international customers). The initial profit booking rate of each contract considers risks surrounding the ability to achieve the technical requirements, schedule and costs in the initial estimated total costs to complete the contract. Profit booking rates may increase during the performance of the contract if we successfully retire risks ~~surrounding~~related to the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract. Conversely, our profit booking rates may decrease if the estimated total costs to complete the

are satisfied and the customer obtains control of the products and services. For performance obligations to deliver products with continuous transfer of control to the customer, revenue is recognized based on the extent of progress towards completion of the performance obligation, generally using the percentage-of-completion cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer as we incur costs on our contracts. For performance obligations in which control does not continuously transfer to the customer, we recognize revenue at the point in time in which each performance obligation is fully satisfied.

As previously disclosed in our 2019 Form 10-K, we are responsible for a program to design, develop and construct a ground-based radar at our RMS business segment. The program has experienced performance issues for which we haveWe periodically ~~accrued reserves. As of June 28, 2020, cumulative losses were approximately $240 million on this program. We may continue to~~ experience issues related to customer requirements and our performance under this contract and have to record additional charges. However, based on the losses previously recorded and our current estimate of the sales and costs to complete the program, at this time we do not anticipate that additional losses, if any, would be material to our operating results or financial condition.

As previously disclosed in our 2019 Form 10-K, we have a program, EADGE-T, to design, integrate, and install an air missile defense command, control, communications, computers - intelligence (C4I) system for an international customer that has experienced performance issues and record losses for ~~which we have periodically accrued reserves~~certain programs. For further discussion on the programs at ~~our~~Aeronautics, RMS ~~business segment. As of June 28, 2020, cumulative losses remained at approximately $260 million. We continue to monitor program requirements~~ and ~~our performance. At this time, we do not anticipate additional charges that would be material to our operating results or financial condition.~~

~~As previously disclosed~~MFC, see “Note 11 - Other” included in our ~~2019 Form 10-K, we have two commercial satellite programs at our Space business segment for which we have experienced performance issues related~~Notes to the development and integration of a modernized LM 2100 satellite platform. These programs are for the delivery of three satellites in total, including two that launched in 2019 and one that launched in February 2020. We have periodically revised our estimated costs to complete these developmental commercial programs. As of June 28, 2020, cumulative losses remained at approximately $410 million for these programs. We do not anticipate that additional losses, if any, would be material to our operating results or financial condition.

upgraded turret for the Warrior Capability Sustainment Program. In 2018, we revised our estimated costs to complete the program as a consequence of performance issues, and recorded charges at our MFC business segment. As of June 28, 2020, cumulative losses remained at approximately $140 million on this program. We may continue to experience issues related to customer requirements and our performance under this contract and may have to record additional reserves. However, based on the losses already recorded and our current estimate of the sales and costs to complete the program, at this time we do not anticipate that additional losses, if any, would be material to our operating results or financial condition.

Aeronautics’ net sales during the quarter ended June ~~28, 2020~~ 27, 2021 increased ~~$953~~$163 million, or ~~17%~~3%, compared to the same period in ~~2019.~~ 2020. The increase was primarily attributable to ~~higher net sales of approximately $700~~about $100 million for the F-16 program due to increased production volume that was partially offset by decreased sustainment volume; and about $90 million for the F-35 program due to increased ~~volume on~~ production ~~development,~~ and sustainment ~~contracts; and about $125~~volume that was partially offset by decreased development activities. These increases were partially offset by lower net sales of approximately $60 million for ~~higher volume on classified development contracts.~~the F-22 program due to decreased sustainment volume.

Aeronautics’ operating profit during the quarter ended June ~~28, 2020 increased $147~~27, 2021 decreased $167 million, or ~~25%~~23%, compared to the same period in ~~2019.~~2020. Operating profit decreased due to a loss of approximately $225 million in the second quarter of 2021 for performance issues experienced on a classified program; and about $20 million for the F-22 program due to lower risk retirements and sustainment volume. These decreases were partially offset by higher operating profit of approximately $45 million for the C-130 program primarily due to higher risk retirements on sustainment activities; and about $20 million for the F-16 program due to increased ~~approximately $130 million~~ production volume and higher risk retirements. Operating profit

Aeronautics’ net sales during the six months ended June ~~28, 2020~~27, 2021 increased ~~$1.7 billion,~~$181 million, or ~~16%~~1%, compared to the same period in ~~2019.~~ 2020. The increase was primarily attributable to ~~higher~~increased volume on classified contracts of approximately $150 million; about $120 million for the F-16 program due to increased production volume that was partially offset by decreased sustainment volume. Net sales for the F-35 program were comparable as increased production and sustainment volume was mostly offset by decreased development volume and the inception-to-date effect of reducing the development profit booking rate in the first quarter of 2021. These increases were offset by lower net sales of approximately ~~$1.4 billion~~$125 million for the ~~F-35~~F-22 program due to ~~increased volume on production,~~decreased sustainment ~~and development contracts; and about $195 million for higher volume on classified development contracts.~~volume.

Aeronautics’ operating profit during the six months ended June ~~28, 2020 increased $234~~27, 2021 decreased $146 million, or ~~20%~~10%, compared to the same period in ~~2019.~~ 2020. Operating profit ~~increased~~decreased approximately ~~$210~~$220 million mostly due to a $225 million loss in the second quarter of 2021 for performance issues experienced on a classified program; and about $25 million for the ~~F-35~~F-22 program due to lower risk retirements and sustainment volume. These decreases were partially offset by an increase of $35 million for the F-16 program due to higher ~~volume and~~ risk retirements on sustainment activities and increased production ~~development,~~volume; and approximately $30 million for the C-130 program due to higher risk retirements on sustainment activities. Operating profit on the F-35 program was comparable as higher risk retirement and volume on production and sustainment ~~contracts.~~activities were offset by lower risk retirements and volume on development activities. Adjustments not related to volume, including net profit booking rate adjustments, were ~~$80~~$155 million ~~higher~~lower during the six months ended June ~~28, 2020~~ 27, 2021 compared to the same period in ~~2019.~~2020.

MFC’s net sales during the quarter ended June ~~28, 2020~~27, 2021 increased ~~$390~~$143 million, or ~~16%~~5%, compared to the same period in ~~2019.~~2020. The increase was primarily attributable to higher net sales of approximately ~~$295~~$110 million for tactical and strike missile programs due to higher production volume (ATACMS and LRASM); and about $35 million for sensors and global sustainment programs due to higher service volume (primarily Special Operations Forces Global Logistics Support Services (SOF GLSS)) and close out activities related to the Warrior Capability Sustainment Program (Warrior) that was terminated by the customer in March 2021.

MFC’s operating profit during the quarter ended June 27, 2021 increased $31 million, or 8% compared to the same period in 2020. Operating profit increased approximately $45 million for sensors and global sustainment programs primarily due to the reversal of the portion of previously recorded losses on the Warrior program in the second quarter of 2021 that are no longer expected to be incurred as a result of the program being terminated. This increase was partially offset by lower operating profit of approximately $15 million on integrated air and missile defense programs due to lower risk retirements (primarily Terminal High Altitude Area Defense (THAAD)). Operating profit for tactical and strike missile programs was comparable as higher production volume (ATACMS and LRASM) was offset by lower volume on the Long Range Stand-Off program. Adjustments not related to volume, including net profit booking rate adjustments, were $25 million higher in the second quarter of 2021 compared to the same period in 2020.

MFC’s net sales during the six months ended June 27, 2021 increased $273 million, or 5%, compared to the same period in 2020. The increase was primarily attributable to higher net sales of approximately $160 million for tactical and strike missile programs due to higher volume (ATACMS, LRASM and JASSM); and about $120 million for integrated air and missile defense programs due to increased volume (primarily Patriot Advanced Capability-3 (PAC-3) and Terminal High Altitude Area Defense (THAAD)); and about $150 million for tactical and strike missile programs due to increased volume (primarily Guided Multiple Launch Rocket Systems (GMLRS) and High-Mobility Artillery Rocket Systems (HIMARS))PAC-3). ~~These increases were partially offset by a decrease~~

MFC’s operating profit during the ~~quarter end~~six months ended June ~~28, 2020~~27, 2021 increased ~~$43~~$31 million, or ~~13%~~4%, compared to the same period in ~~2019.~~ 2020. Operating profit increased approximately $30 million for integrated air and missile defense programs due to increased volume on international contracts (primarily PAC-3 and THAAD); about $20 million for tactical and strike missile programs due to higher risk retirements on classified programs; and about $10 million for energy programs due to higher risk retirements. These increases were partially offset by a d~~ecrease of~~ $15 million for sensors and global sustainment programs due to lower risk retirements across the portfolio partially offset by net lower current period charges of $10 million for performance matters on an international military program. Adjustments not related to volume, including net profit booking rate adjustments, ~~during the quarter June 28, 2020 were comparable to the same period in 2019.~~

MFC’s net sales during the six months ended June 28, 2020 increased $659 million, or 14%, compared to the same period in 2019. The increase was primarily attributable to higher net sales of approximately $420 million for integrated air and missile defense programs due to increased volume (primarily ~~THAAD and~~ PAC-3); and about $325 million for tactical and strike missile programs due to increased volume (primarily GMLRS, hypersonic development programs and HIMARS). These increases were partially offset by a decrease of $65 million as a result of lower volume on energy programs due to the divestiture of the Distributed Energy Solutions business in November 2019.

~~MFC’s operating profit during the six months ended June 28, 2020 increased $22 million, or 3%, compared to the same period in 2019. Operating profit increased approximately $20~~$10 million for tactical and strike missile programs due to higher ~~risk retirements~~volume (primarily LRASM and ATACMS). Operating profit from sensors and global sustainment programs was comparable as the reversal of the portion of previously recorded losses on ~~classified programs; and about $20 million due~~the Warrior program in the second quarter of 2021 that are no longer expected to ~~higher risk retirements on energy programs. These increases were partially~~be incurred as a result of the program being terminated was offset by ~~a decrease of $25 million for integrated air and missile defense programs due to~~ lower risk retirements ~~on international contracts~~ (primarily ~~PAC-3~~Sniper Advanced Targeting Pod (SNIPER®) and ~~THAAD). Adjustments~~Apache) in 2021 compared to the same period in 2020. Adjustments not related to volume, including net profit booking rate adjustments, were ~~$30~~$10 million ~~lower~~higher during the six months ended June ~~28, 2020~~ 27, 2021 compared to the same period in ~~2019.~~2020.

We continue to expect MFC’s ~~2020~~2021 net sales to increase in the ~~high-single digit to low-double~~mid-single digit percentage range infrom 2020 ~~as compared to 2019~~levels driven by higher volume in the ~~tactical and strike missiles and~~integrated air and missile defense ~~businesses, partially offset by a decrease in sales as a result of the divestiture of our Distributed Energy Solutions business.~~business, primarily PAC-3. Operating profit is expected to increase in the ~~mid-to-high-single~~mid-single digit percentage range inabove 2020 ~~as compared to 2019 driven by the increase in sales volume.~~levels. Operating profit margin for ~~2020~~2021 is expected to be slightly ~~lower~~higher than ~~2019~~2020 levels.

RMS’ net sales during the quarter ended June ~~28, 2020~~27, 2021 increased ~~$271~~$203 million, or 7%5%, compared to the same period in ~~2019. Net~~2020. The increase was attributable to higher net sales ~~increased~~of approximately ~~$240~~$230 million for Sikorsky helicopter programs due to higher production volume ~~primarily~~on the Black Hawk, CRH, and CH-53K programs that was partially offset by lower production volume on Seahawk ~~production~~programs. This increase was partially offset by lower net sales of about $35 million for IWSS programs due to lower volume on the TPQ-53 and ~~VH-92A production contracts.~~the LCS programs that was partially offset by higher volume on the CSC and Aegis programs.

RMS’ operating profit during the quarter ended June ~~28, 2020~~27, 2021 increased ~~$82~~$29 million, or ~~24%~~7%, compared to the same period in ~~2019.~~2020. Operating profit increased approximately ~~$80 million for training and logistics solutions (TLS) programs due to a $60 million charge for an army sustainment program in 2019 not repeated in 2020 and $45~~$20 million for Sikorsky helicopter programs due to higher production volume on the Black Hawk, CRH, and CH-53K programs. Operating profit for IWSS programs was comparable as risk retirements on a ground-based radar program were offset by lower risk retirements on the LCS program. Adjustments not related to volume, including net profit booking rate adjustments, were comparable in the second quarter of 2021 to the same period in 2020.

RMS’ net sales during the six months ended June 27, 2021 increased $564 million, or 7%, compared to the same period in 2020. The increase was attributable to higher net sales of $400 million for Sikorsky helicopter programs due to higher production volume on the Black Hawk, CH-53K, CRH, and VH-92A programs, which was partially offset by lower production ~~contracts.~~volume on Seahawk programs; and about $300 million for training and logistics solutions programs primarily due to the delivery of an international pilot training system in the first quarter of 2021. These increases were partially offset by ~~a $25~~lower net sales of about $90 million ~~decrease~~ for ~~integrated warfare systems and sensors (IWSS) programs due to lower risk retirements (primarily Radar Surveillance Systems and Aegis) and a $15 million decrease for~~various C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to lower volume; and about $60 million for integrated warfare systems and sensors programs due to lower volume on the LCS and the TPQ-53 programs that were partially offset by higher volume on the CSC and Aegis programs.

RMS’ operating profit during the six months ended June 27, 2021 increased $86 million, or 11%, compared to the same period in 2020. Operating profit increased approximately $35 million for Sikorsky helicopter programs due to higher production volume on the Black Hawk, CRH, and CH-53K programs; about $25 million for IWSS programs due to risk retirements ~~(primarily undersea combat systems~~on a ground-based radar program and higher risk retirements on Aegis, partially offset by lower risk retirements on the LCS program; and about $20 million for training and logistics solutions programs). due to the delivery of an international pilot training system in the first quarter of 2021. Adjustments not related to volume, including net profit booking rate adjustments, were ~~$35~~$20 million higher~~during the quarter ended June 28, 2020 compared to the same period during 2019.~~

~~RMS’ net sales~~ during the six months ended June ~~28, 2020 increased $255 million, or 3%~~27, 2021 compared to the same period in 2019. Net sales increased approximately $145 million for Sikorsky helicopter programs due to higher volume (primarily Seahawk production programs and VH-92A production contracts partially offset by lower volume on combat rescue helicopter and Black Hawk production programs) and $85 million for C6ISR programs due to higher volume (primarily undersea combat systems programs).2020.

RMS’ operating profit during the six months ended June 28, 2020 increased $79 million, or 11% compared to the same period in 2019. Operating profit increased approximately $80 million for TLS programs due to $70 million in charges for an army sustainment program in 2019 not repeated in 2020 and $65 million for Sikorsky helicopter programs due to higher volume and risk retirements on VH-92A production contracts, and better cost performance and higher risk retirements on international military aircraft programs. These increases were offset by a $45 million decrease for IWSS programs as lower risk retirements (primarily Radar Surveillance Systems and Aegis) and a $15 million decrease for C6ISR programs due to lower risk retirements (primarily undersea combat systems programs). Adjustments not related to volume, including net profit booking rate adjustments, during the six months ended June 28, 2020 were comparable to the same period during 2019.

We ~~continue to~~currently expect RMS’ ~~2020~~2021 net sales to increase in the mid-single digit percentage range ~~above 2019~~from 2020 levels driven ~~primarily~~ by ~~Sikorsky.~~higher volume on Sikorsky helicopter programs and TLS programs. Operating profit is expected to increase in the ~~high-single~~low-double digit percentage range above ~~2019 levels driven by the increase in sales volume.~~2020 levels. Operating profit margin for ~~2020~~2021 is expected to be ~~slightly~~ higher than ~~2019~~2020 levels.

Space’s net sales during the quarter ended June ~~28, 2020~~27, 2021 increased ~~$179~~$300 million, or 7%10%, compared to the same period in ~~2019.~~2020. The increase was primarily attributable to higher net sales of approximately ~~$90~~$125 million for ~~government satellite~~the AWE program due to higher volume; about $100 million for national security space programs due to higher volume (primarily Next ~~Generation Overhead Persistent Infrared (Next~~ Gen OPIR)); and about ~~$85~~$80 million for strategic and missile defense programs due to higher volume (primarily hypersonic development programs). As previously disclosed, effective June 30, 2021 (subsequent to the second quarter), the UK Ministry of Defence renationalized the AWE program. Accordingly, the AWE program will no longer be included in the company's financial results beginning in the third quarter of 2021.

Space’s operating profit during the quarter ended June 27, 2021 increased $83 million, or 33%, compared to the same period in 2020. Operating profit increased approximately $45 million for national security space programs primarily due to higher risk retirements (primarily Space-Based Infrared System (SBIRS)) and higher volume (primarily Next Gen OPIR); and about $35 million due to higher equity earnings from the corporation's investment in United Launch Alliance (ULA). Operating profit for the AWE program was comparable as higher volume was offset by accelerated and incremental amortization expense for intangible assets. Operating profit for strategic and missile defense programs was also comparable as higher volume (hypersonic development programs) was offset by lower risk retirements (primarily Fleet Ballistic Missile (FBM) programs). Adjustments not related to volume, including net profit booking rate adjustments, were $65 million higher in the second quarter of 2021 compared to the same period in 2020.

Sp~~ace’s~~Space’s operating profit during the ~~quarter~~six months ended June ~~28, 2020 decreased $36~~27, 2021 increased $29 million, or ~~13%~~5%, compared to the same period in ~~2019.~~2020. Operating profit ~~decreased~~increased approximately ~~$35~~$30 million for ~~government satellite~~commercial civil space programs due to higher risk retirements (primarily space transportation programs). The national security space program was comparable due to higher risk retirements (primarily SBIRS) and higher volume (primarily Next Gen OPIR), partially offset by lower risk retirements (primarily Advanced Extremely High Frequency (AEHF)). The AWE program was comparable as higher volume was offset by accelerated and incremental amortization expense for intangible assets. Operating profit for strategic and missile defense programs was also comparable as higher volume and risk retirements (hypersonic development programs) was offset by lower risk retirements (primarily FBM programs). Adjustments not related to volume, including net profit booking rate adjustments, were ~~$45~~$60 million ~~lower~~ higher during the ~~quarter~~six months ended June ~~28, 2020~~27, 2021 compared to the same period in ~~2019.~~

Space’s operating profit during the six months ended June 28, 2020 decreased $89 million, or 14%, compared to the same period in 2019. Operating profit decreased approximately $75 million for government satellite programs due to lower risk retirements (primarily AEHF); and about $40 million due to lower equity earnings from the corporation's investment in United Launch Alliance (ULA). These decreases were partially offset by an increase of $20 million for commercial satellite programs for charges recorded for performance matters in 2019 not repeate~~d in~~ 2020. ~~Adjustments not related to volume, including net profit booking rate adjustments, were $85 million lower during the six months ended June 28, 2020 compared to the same period in 2019.~~

We currently expect Space’s ~~2020~~2021 net sales to increase in the ~~high-single~~low-single digit percentage range from ~~2019~~2020 levels ~~largely~~ driven by higher volume on hypersonics programs and on national security space programs (primarily Next Gen ~~OPIR and Hypersonics.~~OPIR), partially offset by lower volume at AWE due to the UK Ministry of Defence’s renationalization of the program on June 30, 2021. Operating profit ~~in 2020~~ is expected to ~~decrease~~increase in the ~~mid-single~~low-single digit percentage range ~~as compared to 2019 driven by lower~~from 2020 levels. Operating profit rate adjustments in government satellites largely driven by AEHF and lower equity earnings in 2020 compared to 2019. As a result, operating profit margin in 2020 is expected to decrease from 2019 levels.

As of June 28, 2020, we had a cash balance of $2.9 billion and no borrowings outstanding under our $2.5 billion revolving credit facility (the credit facility), which is also available for borrowings in the event of a lack of short-term commercial paper availability. To date, the effects of COVID-19 have not had a significant negative impact on our liquidity, cash flows or capital resources. Actions taken by the U.S. Government to increase the rate of progress payments had the effect of increasing our cash from operations, but we used all of this benefit to accelerate payments to our suppliers. The effects of COVID-19 has led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future. The economic impacts of COVID-19 have also negatively affected the equity capital markets and our returns on our pension assets. As described in Item 1A, Risk Factors of our Annual Report on Form 10-K, changes in returns on plan assets may affect our plan funding, cash flows and stockholders’ equity. Differences between the actual plan asset return and the expected long-term rate of return on plan assets (7.00% as of December 31, 2019) impact the measurement of the following year’s Financial Accounting Standards (FAS) pension expense and pension funding requirements.

The CARES Act, along with earlier issued IRS guidance, provides a net deferral of payroll and estimated income tax payments from which we benefited by deferring cash outlays of $560 million during the six months ended June 28, 2020. This will have the effect of increasing cash outlays for payroll taxes during 2021 and 2022. The April and June 2020 federal estimated income tax payments were extended to July 15, 2020; thus, the company deferred the estimated income tax amount of $400 million from this quarter to the third quarter. The CARES Act, among other things, also contains numerous other provisions which may impact Lockheed Martin. We continue to refine the effect of the CARES Act and ongoing government guidance related to COVID-19 that may be issued.

We have a balanced cash deployment strategy to invest in our business and key technologies to provide our customers with enhanced capabilities, enhance stockholder value, and position ourselves to take advantage of new business opportunities when they arise. Consistent with that strategy, we have continued to invest in our business ~~including~~and technologies through capital expenditures, independent research and development, and selective business acquisitions and ~~investments;~~investments. We have returned cash to stockholders through dividends and share ~~repurchases; and~~repurchases. We also continue to actively ~~managed~~manage our debt levels, including maturities and ~~maturities,~~ interest rates, and our pension obligations. We expect to continue to opportunistically manage our pension liabilities through the purchase of group annuity contracts for portions of our outstanding defined benefit pension obligations using assets from the pension trust. Future transactions could be significant and result in us making additional contributions to the pension trust and/or require us to recognize noncash settlement charges in earnings in the applicable reporting period.

To date, the effects of COVID-19 have had limited negative impacts on our liquidity, cash flows and capital resources. The U.S. Government has taken certain actions and enacted legislation to mitigate the impacts of COVID-19 on public health, the economy, state and local governments, individuals, and businesses. In March 2020, the U.S. Department of Defense (DoD) increased the rate for certain progress payments from 80% to 90% for costs incurred and work performed on relevant contracts. Since the pandemic began, Lockheed Martin has remained committed to flowing down the benefits received inception-to-date from the DoD’s modification of the progress payment rate to our supply chain partners. As of June 27, 2021, we have received approximately $1.4 billion of net accelerated progress payments, the majority of which were in 2020. We used the accelerated progress payments from the U.S. Government to accelerate $1.4 billion of payments to our suppliers as of June 27, 2021 that are due by their terms in future periods. We expect to continue accelerating payments to our suppliers through at least the end of 2021.

On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law. Pursuant to the CARES Act, U.S. companies can defer the employer’s portion of social security taxes between March 27, 2020 and December 31, 2020, which allowed us to defer cash outlays of $460 million in 2020, of which approximately half will be paid in the fourth quarter of 2021 and approximately half will be paid in the fourth quarter of 2022. Section 3610 of the CARES Act also authorized the U.S. Government to reimburse qualifying contractors for any paid leave, including sick leave, provided to employees during the pandemic to keep its workforce in a ready state.

On March 11, 2021, the President signed the American Rescue Plan Act of 2021 (ARPA) into law. ARPA extends Section 3610 of the CARES Act through September 2021, among many other stimulus measures. We continue to seek, and anticipate continuing to seek, recovery for certain COVID-19-related costs under Section 3610 of the CARES Act and through our contract provisions. While it is unclear how much we will be able to recover, we continue to pursue specific contract cost recognition and have ~~generated strong~~successfully completed contractual recovery in certain instances. We believe these actions should continue to mitigate some COVID-19 related negative impacts to our operating cash flows ~~which have been~~in 2021.

ARPA also eased funding rules for single-employer defined benefit pension plans by extending the ~~primary source~~amortization of funding shortfalls and enhancing interest rate stabilization, which had the effect of reducing the funding requirements for our ~~operations, capital expenditures,~~single-employer defined benefit pension plans beginning in 2021 and reduced the amount of CAS pension costs allocated to our U.S. Government contracts beginning in 2022. The lower pension contributions will be partially offset by lower tax deductions.

As disclosed in the “Business Overview” section, on December 20, 2020, we entered into an agreement to acquire Aerojet Rocketdyne Holdings, Inc. for approximately $4.4 billion net of Aerojet Rocketdyne’s projected cash balance. The transaction is currently expected to close in the fourth quarter of 2021, subject to receipt of regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and satisfaction of other closing conditions specified in the acquisition agreement. We expect to finance the acquisition through a combination of cash on hand and new debt service and repayments, dividends, share repurchases and postretirement benefit plan contributions. The total remaining authorization for future common share repurchases under our share repurchase program was $1.8 billion asissuances.

Currently, we expect our cash from operations will continue to be sufficient to support our operations and anticipated capital expenditures for the foreseeable future. We also have access to credit markets, if needed, for liquidity or general corporate purposes, and letters of credit to support customer advance payments and for other trade finance purposes such as guaranteeing our performance on particular contracts. ~~See our “Capital Resources” section below for a discussion on financial resources available to us.~~

Six Months Ended
June 28,
2020 June 30,
2019
Cash and cash equivalents at beginning of year $ 1,514 $ 772
Operating activities
Net earnings 3,343 3,124
Non-cash adjustments 851 618
Changes in working capital (509) (1,108)
Other, net 811 697
Net cash provided by operating activities 4,496 3,331
Net cash used for investing activities (632) (508)
Net cash used for financing activities (2,523) (2,428)
Net change in cash and cash equivalents 1,341 395
Cash and cash equivalents at end of period $ 2,855 $ 1,167


	Six Months Ended
	June 27, 2021		June 28, 2020
Cash and cash equivalents at beginning of year	$	3,160	$	1,514
Operating activities
Net earnings	3,652		3,343
Noncash adjustments	833		851
Changes in working capital	(1,510)		(509)
Other, net	41		811
Net cash provided by operating activities	3,016		4,496
Net cash used for investing activities	(389)		(632)
Net cash used for financing activities	(3,042)		(2,523)
Net change in cash and cash equivalents	(415)		1,341
Cash and cash equivalents at end of period	$	2,745	$	2,855

Net cash provided by operating activities ~~increased $1.2 billion~~ during the six months ended June ~~28, 2020~~27, 2021 decreased $1.5 billion compared to the same period in ~~2019.~~2020. The ~~increase~~decrease was primarily due to ~~a lower use of cash related to~~higher growth in working capital and ~~the deferral of~~higher tax ~~payments.~~payments, which were partially offset by an increase in net earnings. The ~~$599 million improvement~~$1.0 billion decrease in cash flows related to working capital (defined as receivables, contract assets, and inventories less accounts payable and contract liabilities) was primarily attributable to ~~liquidation of inventories (primarily classified programs at both Aeronautics and MFC), and~~ timing of production and billing cycles affecting contract assets and contract liabilities (primarily the F-35 ~~program)~~and F-16 programs in our Aeronautics business segment and Sikorsky helicopter programs in our RMS business segment), partially offset by timing of cash payments for accounts payable and liquidation of inventories (primarily the delivery of an international pilot training system in our RMS business segment). ~~Earlier issued IRS guidance provides a deferral~~During the six months ended June 27, 2021, we paid federal and foreign income taxes of ~~April and June 2020 federal estimated income tax payments~~$672 million compared to ~~July 15, 2020; thus, we deferred $400 million of estimated income tax payments and made foreign tax payments of approximately~~ $45 million during the six months ended June 28, ~~2020 compared to cash~~2020. The increase in income tax payments is primarily due to the deferral of ~~approximately $474~~$400 million ~~during~~of federal income tax payments from the ~~six months ended June 30, 2019.~~

~~In addition, net cash provided by operating activities for~~second quarter of 2020 to the third quarter of 2020 pursuant to guidance from the Internal Revenue Service. Additionally, during the six months ended June 28, 2020 ~~included the receipt of approximately $930~~we deferred $160 million of ~~net accelerated progress~~ payments ~~due to the U.S. Government's increase in the progress payment rate from 80 percent to 90 percent, the deferral of $400 million as discussed above, and the deferral of $160 million~~ for the employer portion of payroll taxes to the fourth quarters of 2021 and 2022 pursuant to the CARES Act. ~~We used the accelerated progress payments from the U.S. Government plus cash on hand to accelerate $1.3 billion of payments to our suppliers for the six months ended June 28, 2020.~~

Net cash used for investing activities ~~increased $124~~during the six months ended June 27, 2021 decreased $243 million compared to the same period in 2020. The decrease in cash used for investing activities is due to the receipt of the first two installment payments totaling $231 million in the first six months of 2021 from the sale of our ownership interest in the Advanced Military Maintenance, Repair and Overhaul Center (AMMROC) joint venture in the fourth quarter of 2020. Capital expenditures totaled $599 million and $636 million during the six months ended June ~~28, 2020 compared to the same period in 2019. Capital expenditures totaled $636 million~~27, 2021 and ~~$533 million during the six months ended~~ June 28, ~~2020 and June 30, 2019.~~2020. The majority of our capital expenditures were for equipment and facilities infrastructure that generally are incurred to support new and existing programs across all of our business segments. We also incur capital expenditures for information technology to support programs and general enterprise information technology infrastructure, inclusive of costs for the development or purchase of internal-use software.

During the six months ended June 27, 2021 and June 28, 2020, we paid dividends totaling $1.5 billion ($5.20 per share) and $1.4 billion ($4.80 per share). We repurchased 4.2 million shares of our common stock for ~~financing activities~~$1.5 billion pursuant to accelerated share repurchase (ASR) agreements during the six months ended June 27, 2021. During the six months ended June 28, 2020, ~~was primarily driven by dividend payments~~we purchased 2.8 million shares of our common stock for $1.0 billion, pursuant to an ASR agreement and ~~share repurchases. During~~open market repurchases under Rule 10b5-1 of the Securities Exchange Act of 1934. In addition, during the six months ended June ~~30, 2019 we also made net repayments of $600 million for commercial paper.~~

~~On May 20,~~28, 2020, we received net cash proceeds of $1.1 billion from the issuance of ~~senior unsecured notes, consisting~~long term debt, which was used to repay $1.1B of $400 million aggregate principal amount of 1.85% Notes due in 2030 and $750 million aggregate principal amount of 2.80% Notes due in 2050. On June 16, 2020, we used the net proceeds from the offering plus cash on hand to redeem $750 million of the outstanding $1.25 billion in aggregate principal amount of our 2.50% Notes due in 2020 and $400 million of the outstanding $900 million in aggregate principal amount of our 3.35% Notes due in 2021, each at their redemption price.

At June ~~28, 2020,~~27, 2021, we also had a $2.5 billion revolving credit facility with various banks that is available for general corporate purposes with an expiration date of August 24, 2024. The undrawn portion of the credit facility also serves as a backup facility for the issuance of commercial paper. The total amount outstanding at any point in time under the combination of our commercial paper program and the credit facility cannot exceed the amount of the credit facility. We may request and the banks may grant, at their discretion, an increase in the borrowing capacity under the credit facility of up to an additional $500 million. There were no borrowings outstanding under the credit facility at June ~~28, 2020.~~27, 2021.

We 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 than or less than the amount reported at the end of the period. There were no commercial paper borrowings outstanding as of June ~~28, 2020~~27, 2021 and December 31, ~~2019.~~2020. We may, as conditions warrant, from time to time issue commercial paper backed by our credit facility to manage the timing of cash flows. However, as described under Item 1A, Risk Factors of our 2020 Form 10-K, depending on market conditions, commercial paper may not be available on favorable terms or at all.

Our outstanding debt, net of unamortized discounts and issuance costs was ~~$12.7~~$12.2 billion as of June ~~28, 2020~~27, 2021 and ~~mainly~~ is in the form of publicly-issued notes that bear interest at fixed rates. The outstanding debt at June 28, 2020 is inclusive of the issuance of $1.2 billion in aggregate principal amount of senior unsecured notes in May 2020 and the June 2020 redemption of $750 million of the outstanding $1.25 billion in aggregate principal amount of our 2.50% Notes due 2020 and $400 million of the outstanding $900 million in aggregate principal amount of our 3.35% Notes due 2021, as described in “Note 10 – Other” included in our Notes to Consolidated Financial Statements. As of June ~~28, 2020,~~27, 2021, we had ~~$500~~$506 million of borrowings scheduled to mature in ~~November 2020 with~~ the next twelve months, of which $500 million matures in September 2021. The remainder of our debt is due from ~~2021~~2023 to 2052. As of June ~~28, 2020,~~27, 2021, we were in compliance with all covenants contained in our debt and credit agreements. ~~Other than the debt issuance and redemption, described in “Note 10 – Other” included in our Notes to Consolidated Financial Statements, there~~There were no material changes during the quarter or six months ended June ~~28, 2020~~27, 2021 to our contractual commitments as presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our ~~2019~~2020 Form 10-K that were outside the ordinary course of our business.

During the first half of 2020, the F-35 program completed several milestones both domestically and internationally. The U.S. Government continued testing the aircraft, including ship trials, mission and weapons systems evaluations, and the F-35 fleet recently surpassed 290,000 flight hours. During the second quarter of ~~2020,~~2021, Switzerland's Federal Council announced its decision to purchase the ~~U.S. Government awarded the production of 84 F-35 Block Buy~~F-35A Conventional Takeoff and Landing (CTOL) aircraft ~~in addition to the 364 aircraft previously awarded. Since program inception, we have delivered 538 production F-35 aircraft, demonstrating the F-35 program’s continued progress~~along with sustainment and longevity. The first 538 F-35 aircraft delivered to U.S. and international customers include 382 F-35A variants, 115 F-35B variants, and 41 F-35C variants. The full-rate production decision, also known formally as Milestone C, is expected to be delayed by the DoD until Initial Operational Test and Evaluation (IOT&E) activities are complete in the Naval Air Systems Command (NAVAIR)-led Joint Simulation Environment (JSE). The JSE is used to conduct simulated evaluations of the F-35 in a range of high-threat scenarios. The data will be utilized by the U.S. Governmenttraining services, as part of their ~~evaluation to transition the F-35 program from Low Rate Initial Production (LRIP) into full-rate production.~~Air 2030 modernization program.

In response to COVID-19 F-35 supplier delays ~~in May 2020,~~and in conjunction with the F-35 Joint Program Office, we tapered our production rate ~~over a three-month period, temporarily adjusting~~in 2020. In 2021, we expect the ~~work schedules for~~production rate to improve from its 2020 levels but continue to be impacted by COVID-19. In addition, we are in discussions with the F-35 Joint Program Office to finalize the 2022 F-35 production ~~workforce in Fort Worth, Texas. Delivery schedules are being adjusted accordingly~~profile, which will consider both COVID-19 recovery and ~~we currently expect to return to pre-COVID-19~~overall long-term production ~~levels in the fall. At this time, we estimate production delays of approximately 18-24 aircraft, however, we will accelerate production when we return to pre-COVID-19 conditions.~~rates. See the discussion in Business Overview - ~~COVID-19 and Item 1A, Risk Factors.~~

process to formally remove Turkey from the program as a result of Turkey accepting delivery of the Russian S-400 air and missile defense system. To date, the Administration has not imposed sanctions on Turkish entities involved in the S-400 procurement, although sanctions under the Countering America’s Adversaries Through Sanctions Act (CAATSA) remain a risk. Additionally, sanctions could be imposed against Turkey as a result of future legislation. We are monitoring developments in Congress and the potential impacts of any sanctions and other actions regarding Turkey on the F-35 program and on our other programs involving Turkey. Depending on the scope and applicability of any sanctions or other actions, the impact could be material to our operations, operating results, financial position or cash flows. Turkey previously committed to purchase up to 100 F-35 aircraft, of which six have completed production.

Turkish suppliers also produce component parts for the F-35 program, many of which are single-sourced. To minimize the risks of disruption of our supply chain and ensure continuity of F-35 production, we have been working closely with the DoD and supporting activities to identify and engage alternate suppliers for the component parts produced by Turkish suppliers. We have made significant progress toward this end, but due to the procedure to qualify new parts and suppliers, this collaborative process between DoD and Lockheed Martin is ongoing. Earlier this year, the DoD publicly confirmed that Turkey would be permitted to provide certain components for the F-35 through 2022. While the transition timeline is an important first step, it is equally important that our replacement capacity is re-established so that production is not impacted. Efforts to date have significantly reduced our risk, but final resolution on a limited number of remaining components could affect F-35 deliveries, and any accelerated work stoppage would impact cost. International sales of the F-35 are negotiated between the U.S. Government and international governments and the process that formally removed Turkey from the F-35 program is a government-to-government matter. We will continue to follow official U.S. Government guidance as it relates to completed Turkish aircraft and the export and import of component parts from the Turkish supply chain.

The effects of potential U.S. Government sanctions on Turkey, and Turkey’s removal from the F-35 program do not appear to be significant at this time. However, unforeseen actions could impact the timing of orders, disrupt the production of aircraft, delay delivery of aircraft, disrupt delivery of sustainment components produced in Turkey and impact funding on the F-35 program to include the result of any reprogramming of funds that may be necessary to mitigate the impact of alternate sources for component parts made in Turkey. While, in the case of the F-35 program, we expect that these costs ultimately would be recovered from the U.S. Government, the availability or timing of any recovery could adversely affect our cash flows and results of operations. For additional discussion, including the risk of sanctions on other programs involving sales to Turkey or work with Turkish industry, see Item 1A - Risk Factors of our 2019 Annual Report on Form 10-K.

Given the size and complexity of the F-35 program, we anticipate that there will be continual reviews related to aircraft performance, program schedule, cost, and requirements as part of the DoD, Congressional, and international partner countries’ oversight and budgeting processes. Current program challenges include, but are not limited to supplier and partner performance, software development, receiving funding for contracts on a timely basis, the level of cost associated with life cycle operations, ~~and~~ sustainment and warranties, ~~receiving funding for production contracts on a timely basis,~~and executing future flight tests and supporting the resulting findings ~~resulting~~ from testing and operating the aircraft.

There have been no significant changes to the critical accounting policies disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2019 Annual Report on~~2020 Form ~~10-K.~~10-K, except for an update related to our postretirement benefit plans to describe changes to our funding requirements and the amount of pension costs recoverable under contracts with the U.S. Government as a result of the American Rescue Plan Act of 2021 in our Form 10-Q for the quarter ended March 28, 2021.

The carrying value of our goodwill balance was $10.8 billion at June 27, 2021, including $2.7 billion of goodwill at our Sikorsky reporting ~~unit included goodwill of $2.7 billion, an indefinite-lived trademark intangible asset of $887 million, and finite-lived customer program intangible assets of $2.2 billion as of June 28, 2020.~~unit. In the fourth quarter of ~~2019,~~2020, we performed our annual impairment test for goodwill, and ~~indefinite-lived trademark intangible asset. We were not required to~~the results of that test ~~the finite-lived program intangible asset because there were~~indicated no ~~indicators of a possible impairment.~~impairment existed. As of the date of our ~~2019~~2020 annual impairment test, we estimated that the fair value of our Sikorsky reporting unit exceeded its carrying value for goodwill by a margin of approximately ~~40% and the~~30%.

~~The fair values and carrying values of our goodwill and indefinite-lived trademark intangible asset at~~ our Sikorsky ~~business are closely aligned. Therefore, any business deterioration,~~reporting unit can be significantly impacted by its performance, contract ~~cancellations or~~ terminations, or changes in expected future orders, ~~could cause our sales, earnings and cash flows to decline below current projections and could cause goodwill and intangible assets to be impaired. Similarly,~~general market ~~factors utilized in the impairment analysis,~~pressures, including ~~long-term~~U.S. Government budgetary constraints, discount rates, long term growth rates, and ~~discount rates could negatively impact the fair value of our reporting units. As previously disclosed, based~~changes in U.S. (federal or state) or foreign tax laws and regulations, or their interpretation and application, including those with retroactive effect, along with other significant judgments. Based on our assessment of these circumstances, we have determined that goodwill ~~and indefinite-lived trademark intangible assets~~ at our Sikorsky ~~business are~~reporting unit is at risk for impairment should there be a deterioration of projected cash ~~flows. While we~~flows of the reporting unit.

As disclosed in “Item ~~7A.~~7A, Quantitative and Qualitative Disclosures About Market Risk” of our ~~Annual Report on~~2020 Form 10-K, ~~for the year ended December 31, 2019,~~ we transact business globally and are subject to risks associated with changing foreign currency exchange rates. We enter into foreign currency hedges such as forward and option contracts that change in value as foreign currency exchange rates change. Our ~~other~~ exposures to market risk have not changed materially since December 31, ~~2019.~~2020. See “Note ~~8 –~~9 - Fair Value Measurements” included in our Notes to Consolidated Financial Statements for additional discussion.

This Form 10-Q contains statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements within the meaning of the federal securities laws, and are based on our current expectations and assumptions. The words “believe,” “estimate,” “anticipate,” “project,” “intend,” “expect,” “plan,” “outlook,” “scheduled,” “forecast” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially due to factors such as:

•~~the effect of changes in (or in the interpretation of)~~ procurement and other regulations and policies affecting our industry, ~~including federal rules prohibiting the use of certain Chinese telecommunications equipment,~~ export of our products, cost allowability or recovery, preferred contract type, and ~~potential changes to the U.S. Department of Defense’s (DoD) acquisition regulations relating to~~performance and progress payments ~~and performance-based payments and a preference for fixed-price contracts;~~policy, including a reversal or modification to the ~~recent actions by DoD~~DoD’s increase to ~~increase~~ the progress payment rate ~~and accelerate cash to its prime and small suppliers~~ in response to ~~the COVID-19 impacts;~~COVID-19;

These are only some of the factors that may affect the forward-looking statements contained in this Form 10-Q. For a discussion identifying additional important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, see our filings with the U.S. Securities and Exchange Commission (SEC) including, but not limited to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 and subsequent Quarterly Reports on Form 10-Q. Our filings may be accessed through the Investor Relations page of our website, www.lockheedmartin.com/investor, or through the website maintained by the SEC at www.sec.gov.

Our actual financial results likely will be different from those projected due to the inherent nature of projections. Given these uncertainties, forward-looking statements should not be relied on in making investment decisions. The forward-looking statements contained in this Form 10-Q speak only as of the date of its filing. Except where required by applicable law, we expressly disclaim a duty to provide updates to forward-looking statements after the date of this Form 10-Q to reflect subsequent events, changed circumstances, changes in expectations, or the estimates and assumptions

We are a party ~~to or have property subject~~ 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 will have a material adverse effect on the corporation as a whole, notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings in any particular interim reporting period. We cannot predict the outcome of legal or other proceedings with certainty. These matters include the proceedings summarized in “Note ~~7 –~~8 - Legal Proceedings and Contingencies” included in our Notes to Consolidated Financial Statements and “Note 1415 – Legal Proceedings, Commitments and Contingencies” in our Annual Report on Form 10-K for the year ended December 31, ~~2019 (2019~~2020 (2020 Form 10-K) filed with the U.S. Securities and Exchange Commission.

We are subject to federal, state, local and foreign requirements for the protection of the environment, including those for discharge of hazardous materials and remediation of contaminated sites. Due in part to the complexity and pervasiveness of these requirements, we are a party to or have property subject to various lawsuits, proceedings and remediation obligations. The extent of our financial exposure cannot in all cases be reasonably estimated at this time. For information regarding the matters discussed above, including current estimates of the amounts that we believe are required for remediation or clean-up to the extent estimable, see “Note ~~7 –~~8 - Legal Proceedings and Contingencies” included in our Notes to Consolidated Financial Statements. See also “Critical Accounting Policies – Environmental Matters” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 1415 – Legal Proceedings, Commitments and Contingencies”, each in our ~~2019~~2020 Form 10-K, for a description of previously reported matters.

As a U.S. Government contractor, we are subject to various audits and investigations by the U.S. Government to determine whether our operations are being conducted in accordance with applicable regulatory requirements. U.S. Government investigations of us, whether relating to government contracts or conducted for other reasons, could result in administrative, civil or criminal liabilities, including repayments, fines or penalties being imposed upon us, suspension, proposed debarment, debarment from eligibility for future U.S. Government contracting or suspension of export privileges.

Suspension or debarment could have a material adverse effect on us because of our dependence on contracts with the U.S. Government. U.S. Government investigations often take years to complete and many result in no adverse action against us. We also provide products and services to customers outside of the U.S., which are subject to U.S. and foreign laws and regulations and foreign procurement policies and practices. Our compliance with local regulations or applicable U.S. Government regulations also may be audited or investigated.

While we attempt to identify, manage and mitigate risks and uncertainties associated with our business to the extent practical under the circumstances, some level of risk and uncertainty will always be present. “Item 1A. Risk Factors” of our ~~2019~~2020 Form 10-K describes some of the risks and uncertainties associated with our business, including U.S. Government funding, as further described in the “Industry Considerations” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q. These risks and uncertainties have the potential to materially affect our business, results of operations, financial condition, cash flows, projected results and future prospects. Except for the risk factors discussed below, we do not believe that there have been any material changes to the risk factors disclosed in our ~~2019~~2020 Form 10-K.

~~The global outbreak~~As a result of Turkey accepting delivery of the ~~coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization~~Russian S-400 air and ~~a national emergency by~~missile defense system, the U.S. Government removed Turkey from the F-35 program in ~~March~~2019 and in December 2020 imposed sanctions on Turkey’s defense procurement agency (SSB) and has negatively affected the U.S. and global economies, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place” and quarantine restrictions and created significant disruptioncertain of the ~~financial markets.~~agency’s officers under the Countering America’s Adversaries Through Sanctions Act (CAATSA). The ~~pandemic has presented unprecedented business challenges,~~primary sanction imposed was a restriction on all new U.S. export licenses and we have experienced impacts in each of our business areas related to COVID-19, primarily in increased coronavirus-related costs, delays in supplier deliveries, impacts of travel restrictions, access to some locations, and the impacts of remote work and adjusted work

schedules. The extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our programs in the expected timeframe, remains uncertain and will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S. Government, state and local government officials, and international governments to prevent and manage disease spread, all of which are uncertain and cannot be predicted. The long-term impacts of COVID-19 on government budgets and other funding priorities, including international priorities, that impact demandauthorizations for ~~our products and services and our business are also difficult to predict.~~

In accordance with the Department of Homeland Security’s identification of the Defense Industrial Base as a critical infrastructure sector in March 2020, our U.S. production facilities have continued to operate in support of essential products and services required to meet national security commitmentsany goods or technology transferred to the ~~U.S. Government~~SSB, but does not apply to current, valid export licenses and the U.S. military. Although we are designated as a critical infrastructure workforce, operations have been adjusted in response to the pandemic, including, most significantly, a reduction in the F-35 production rate due primarily to supplier delays and a temporary schedule adjustment for the F-35 production workforce in Fort Worth, Texas, and additional production delays, facility closures, work slowdowns, or temporary stoppages could occur. In addition, other countries have different practices and policies that can affect our international operations and the operations of our suppliers and customers. For example, we had a brief pause in operations at the F-35 Final Assembly and Check Out (FACO) facilities in Japan and Italy in March in observance of such countries’ COVID-19 policies. Additional closures could occur, and base closures, travel restrictions and quarantine requirements both within and outside the U.S. have affected our business. In many cases facilities are not operating under full staffing as a result of COVID-19, which could have an indeterminate longer-term impact. Flight test operations and training are being impacted by travel restrictions as a result of COVID-19, which has delayed some deliveries to customers.authorizations. We ~~also have some limited operations that are not designated as critical infrastructure and therefore have been mandated to close or operate at only minimum basic operations.~~

The U.S. Government has taken actions in response to COVID-19 to increase the progress payment rates in new and existing contracts and accelerate contract awards to provide cash flow and liquidity for companies in the Defense Industrial Base, including large prime contractors like Lockheed Martin and smaller suppliers. We continue to proactively monitor our supply chain and have implemented multiple actions to help mitigate the effects of COVID-19, including accelerating payments to suppliers within our global supply base as a result of the actions taken by the DoD in changing the progress payment policy. We plan to continue to accelerate payments to the supply chain for the remainder of the year in order to mitigate COVID-19 risks, prioritizing impacted suppliers and small businesses. As described in Item 1A, Risk Factors of our Annual Report on Form 10-K, we rely on other companies andexpect the U.S. Government to ~~provide materials, major components and products, and~~continue to perform a portion of the services that are provided to our customers under the terms of most of our contracts. Many of these suppliers also supply parts for commercial aviation businesses which have been more significantly impacted by the pandemic due to the impactsengage Turkey on these markets. Global supply chain disruption caused by the response to COVID-19 could impact our ability to perform on our contracts. We have identified a number of suppliers that have had potential delivery impacts due to COVID-19 and are working to manage those impacts. However, if we are not able to implement alternatives or other mitigations, deliveries and other milestones on affected programs could be adversely impacted.

Delays in inspection, acceptance and payment by our customers, many of whom are teleworking, could also affect our sales and cash flows. This is particularly an issue with respect to classified work that is unable to be done remotely. Limitations on government operations can also impact regulatory approvals such as export licenses that are needed for international sales and deliveries. In addition, we could experience delays in new program starts or awards of future work as well as the uncertain impact of contract modifications to respond to the national emergency. Current limitations on travel to customers could impact international orders. We have been granted some travel exemptions to allow us to continue certain activitiesissues, but we have no ~~assurance~~indication that ~~they~~the sanctions will ~~continue or~~be removed, that additional ~~restrictions~~sanctions will not be ~~imposed. If~~imposed or that Turkey will not issue reciprocal sanctions.

Turkish suppliers continue to produce component parts for the F-35 program, some of which are single-sourced. We have made significant ~~portions of our workforce are unable~~progress transitioning to ~~work effectively, including because of illness, quarantines, absenteeism, government actions, facility closures, travel restrictions or other restrictions~~non-Turkish suppliers, but due to ~~COVID-19,~~the procedure to qualify new parts and suppliers, this collaborative process between DoD and Lockheed Martin is ongoing. During 2020, the DoD publicly confirmed that Turkish suppliers would be permitted to provide certain components for the F-35 through 2022. Efforts to date to re-establish our ~~operations will be impacted. Additionally, we~~replacement capacity have ~~not previously experienced such~~significantly reduced our risk, but final resolution on a ~~significant portion~~limited number of ~~our workforce working remotely for a prolonged period, so its effects on our long-term operations are unknown. The impact of COVID-19~~remaining components could ~~worsen depending on the duration and spread of the COVID-19 outbreak or resurgences of COVID-19 infection in affected regions after they have begun to experience improvement.~~

for costs arising from certain paid leave, including sick leave, a contractor provides to keep its employees or subcontractors in a ready state, including to protect the life and safety of government and contractor personnel through September 30, 2020. Reimbursement of any costs under Section 3610 of the CARES Act increases sales, but is not expected to be at a profit or fee and so would have the effect of reducing our margins in future periods. These cost increases, including costs for employees whose jobs cannot be performed remotely, may not be fully recoverable under our contracts, particularly fixed-price contracts, or adequately covered by insurance. We also have no assurance that Congress will appropriate funds to cover the reimbursement of defense contractors authorized by the CARES Act, which could reduce funds available for other U.S. government defense priorities.

The continued spread of COVID-19 has also led to disruption and volatility in the global capital markets, which depending on future developments could impact our capital resources and liquidity in the future. From time to time, we have used commercial paper backed by our revolving credit facility to manage the timing of cash flows. The commercial paper market was temporarily disrupted in March 2020 as a result of COVID-19, and while these markets are currently operating in a normal manner, depending on future market conditions and volatility, commercial paper may not be available on favorable terms or at all, or in the capacity desired. COVID-19 has also negatively affected the equity capital markets and our returns on our pension assets. As described in Item 1A, Risk Factors of our Annual Report on Form 10-K, changes in returns on plan assets may affect our plan funding, cash flows and stockholders’ equity. We are also monitoring the impacts of COVID-19 on the fair value of our assets. While we do not currently anticipate any material impairments on our assets as a result of COVID-19, future changes in expectations for sales, earnings and cash flows related to intangible assets and goodwill below our current projections could cause these assets to be impaired. As disclosed in Item 1A, Risk Factors of our Annual Report on Form 10-K, the carrying value and fair value of our Sikorsky reporting unit are closely alignedF-35 deliveries, and any business deterioration, contract cancellations or terminations, or market pressures could cause our sales, earnings and cash flows to decline below our current projections and could cause goodwill and intangibles to be impaired.

On July 14, 2020, the People’s Republic of China (China) announced it may impose sanctions against Lockheed Martin in response to a recent Congressional Notification of the potential Foreign Military Sale of Repair and Recertification Patriot Advanced Capability-3 (PAC-3) Missiles to Taiwan. Foreign military sales are government-to-government transactions and weaccelerated work ~~closely with the U.S. Government on any military sales to international customers.~~stoppage would impact cost. We will continue to follow official U.S. Government guidance as it relates to ~~sales to Taiwan~~completed Turkish aircraft and the export and import of component parts from the Turkish supply chain. The effects on the F-35 program of the U.S. Government sanctions on the SSB and Turkey’s removal from the F-35 program do not ~~see a material impact on Lockheed Martin sales~~appear to be significant at this time. ~~China has not specified~~However, unforeseen actions could impact the ~~nature~~timing of orders, disrupt the production of aircraft, delay delivery of aircraft, disrupt delivery of sustainment components produced in Turkey and impact funding on the F-35 program to include the result of any ~~such~~reprogramming of funds that may be necessary to mitigate the impact of alternate sources for component parts made in Turkey. While, in the case of the F-35 program, we expect that these costs ultimately would be recovered from the U.S. Government, the availability or timing of any recovery could adversely affect our cash flows and results of operations.

We have a number of contracts with Turkish industry for the Turkish Utility Helicopter Program (TUHP), which anticipates the co-production program with Turkish industry for production of T70 helicopters for use in Turkey, as well as the related provision of Turkish goods and services under buy-back or offset obligations, to include the future sales of helicopters built in Turkey for sale globally. Although existing export licenses should not be subject to the current sanctions, ~~but~~we expect pending and future export licensing applications and any required modifications, extensions or changes in scope to the existing licenses, where SSB is a party to the transaction, would be denied, adversely affecting our ability to perform the affected contracts. For example, we received a denial of a temporary import license application and a denial of an extension of a permanent export license application in April 2021 and June 2021 respectively, which impacts our ability to perform certain obligations under an agreement in support of TUHP and we subsequently provided force majeure notices under certain contracts related to TUHP. Some export licenses related to these programs are scheduled to expire later in 2021 and are unlikely to be renewed. These contracts may be restructured which could ~~seek to restrict our commercial~~result in reduced future sales or ~~supply chain,~~terminated which could potentially impact our ability to recover certain costs. In addition, we have other programs where we work with Turkish industry, including our supply of rare earth or other raw materials, and could also impose sanctions on our suppliers, teammates or partners. As further described in Item 1A, Risk Factors of our Annual Report on Form 10-K, wefor domestic U.S. BLACK HAWK helicopter production, that rely on ~~other companies to provide materials, major~~ components ~~and products, and to perform a portion of~~from Turkish suppliers. While these commercial relationships are not affected by the ~~services that are provided to our customers, which involve risks, and some raw materials required for our products are largely controlled by a single country and, therefore, can~~current sanctions, they could be adversely affected by ~~potential trade actions involving that country. The nature, timing and potential impact~~the imposition of ~~any sanctions that may be imposed by China or any other related actions that may be taken cannot be determined at this time.~~

We continue to evaluate the potential effect of the United Kingdom’s (UK) departure from the European Union (EU) (commonly referred to as Brexit) on our business operations and financial results. We anticipate that the most probable near-term effects are likely to reflect the pressure Brexit is placing on the UK government, which may influence the government’s ability to make decisions on large complex programs of the type we perform. Brexit also may have adverse implications on the movement of products or sustainment activities between the UK and EU or may increase costs. Additionally, Brexit may impact the value of the pound sterling. If the pound sterling were to remain depressed against the U.S. dollar, this could negatively impact the ability of the UK government to afford our products and services. While we have operations in the UK and these operations have activity between the UK and the EU (e.g., sales, supply chain, or reliance on personnel), we currently do not anticipate that Brexit will have a material impact on our operations or our financial results. Additionally, our practice is to substantially hedge all of our currency exposure. Therefore, we do not have material currency exposure to the pound sterling or the euro.additional sanctions.

~~International sales also may be affected by actions taken by~~Although the ~~U.S. Government in the exercise of foreign policy, Congressional oversight or the financing of particular programs. For example, Congress may act~~existing sanctions are not currently expected to ~~prevent or impose conditions upon the sale or delivery of~~have a material effect on our products, such as delays in obtaining Congressional approvals for exports requiring Congressional notification to the Kingdom of Saudi Arabia and Turkey and the suspension of sales of F-35 aircraft to Turkey and potential sanctions. In addition, discussions in Congressbusiness, they may result in the loss of future sales, and any future sanctions or reciprocal actions by Turkey could result in further restrictions on ~~the Kingdom~~exports or imports, reductions in backlog, return of ~~Saudi Arabia. Our international business~~advance payments, costs to develop alternate supply sources, restrictions on payments, force majeure events or contract restructurings or terminations. Such activity also ~~may be impacted by changes~~could result in foreign national priorities, foreign government budgets, global economic conditions, and fluctuations in foreign currency exchange rates. Sales of military products are also affected by defense budgets and U.S. foreign policy, including trade restrictions and disputes, and there could be significant delays or other issues in reaching definitive agreements for announced programs and international customer priorities could change. Additionally, the timing of ordersclaims from our ~~international customers can be less predictable than for our U.S. customers and~~suppliers, which may ~~lead to fluctuations in~~include both the amount ~~reported each year for~~established in any settlement agreements, the costs of evaluating supplier settlement proposals and the costs of negotiating settlement agreements. These effects could have a material impact on our ~~international sales.~~operating results, financial position and cash flows.

The following table provides information about our repurchases of our common stock that is registered pursuant to Section 12 of the Securities Exchange Act of 1934 during the quarter ended June ~~28, 2020.~~27, 2021.



Period (a)	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)	Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (b)
					(in millions)
March 29, 2021 – April 25, 2021(c)	1,805,481	$	—	1,805,481	$	1,511
April 26, 2021 – May 30, 2021	523	$	376.00	—	$	1,511
May 31, 2021 – June 27, 2021(c)	519,950	$	—	519,950	$	1,511
Total(c)(d)	2,325,954	$	376.00	2,325,431

~~Period~~ (a)^(a)

Total Number
of Shares
Purchased

Average
Price Paid
Per Share

~~Total Number of~~

~~Shares~~

~~Purchased as~~

~~Part of Publicly~~

~~Announced Plans or Programs~~ ^(b)

~~Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs~~ ^(b)

~~(in millions)~~

~~March 30, 2020 – April 26, 2020~~

~~192,843~~

~~366.44~~

~~192,843~~

~~1,976~~

~~April 26, 2020 – May 31, 2020~~^(c)

~~649,219~~

~~376.06~~

~~648,678~~

~~1,882~~

~~June 1, 2020 – June 28, 2020~~

~~298,460~~

~~374.65~~

~~298,460~~

~~1,770~~

~~Total~~^(c)(d)

~~1,140,522~~

~~372.99~~

~~1,139,981~~

^(b)In October 2010, our Board of Directors approved a share repurchase program pursuant to which we are authorized to repurchase our common stock in privately negotiated transactions or in the open market at prices per share not exceeding the then-current market prices. From time to time, our Board of Directors authorizes increases to our share repurchase program. The total remaining authorization for future common share repurchases under our share repurchase program was ~~$1.8~~$1.5 billion as of June ~~28, 2020.~~27, 2021. Under the program, management has discretion to determine the dollar amount of shares to be repurchased and the timing of any repurchases in compliance with applicable law and regulation. This includes purchases pursuant to Rule 10b5-1 plans, including accelerated share repurchases. The program does not have an expiration date.

^(c)During the first quarter of ~~2020,~~ 2021,we entered into an accelerated share repurchase (ASR) agreement to repurchase ~~$500 million~~$1.0 billion of our common stock through April ~~2020.~~2021. Under the terms of the ASR agreement, ~~in March 2020~~ we paid ~~$500 million~~$1.0 billion and received an initial delivery of ~~1,041,884~~1,851,680 shares of our common st~~ock.~~stock in February 2021. Upon final settlement of the ASR agreement in April ~~2020,~~2021, we received an additional ~~398,391~~1,016,194 shares of our common stock for no additional consideration based on the average price paid per share of ~~$347.16,~~$348.69, calculated with reference to the volume-weighted average price (VWAP) of our common stock over the term of the agreement, less a negotiated discount. Subsequently, in April 2021, we entered into a second ASR agreement to repurchase $500 million of our common stock. Under the terms of the second ASR agreement, we paid $500 million and received an initial delivery of 789,287 shares of our common stock in April 2021. Upon final settlement of the second ASR agreement in June 2021, we received an additional 519,950 shares of our common stock for no additional consideration based on the average price paid per share of $381.90, calculated with reference to the VWAP of our common stock over the term of the agreement, less a negotiated discount.See “Note ~~9 –~~10 - Stockholders’ Equity” included in our Notes to Consolidated Financial Statements. Average Price Paid Per Share above does not include ASR shares.


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


	June 27, 2021		December 31, 2020
Assets
Aeronautics	$	11,810	$	9,903
Missiles and Fire Control	4,985		4,966
Rotary and Mission Systems	17,828		18,035
Space	6,779		6,451
Total business segment assets	41,402		39,355
Corporate assets (a)	10,697		11,355
Total assets	$	52,099	$	50,710


	June 28, 2020				December 31, 2019
Assets
Aeronautics	$	9,801	$	9,109
Missiles and Fire Control	5,257		5,030
Rotary and Mission Systems	18,498		18,751
Space	6,221		5,844
Total business segment assets	39,777		38,734
Corporate assets ^(a)	9,826		8,794
Total assets	$	49,603	$	47,528


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


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


	Six Months Ended
	June 28, 2020				June 30, 2019
Operating activities
Net earnings	$	3,343	$	3,124
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	608		565
Stock-based compensation	115		104
Equity method investment impairment	128		—
Gain on property sale	—		(51)
Changes in assets and liabilities
Receivables, net	(498)		(102)
Contract assets	(727)		(916)
Inventories	98		(602)
Accounts payable	191		237
Contract liabilities	427		275
Postretirement benefit plans	(77)		552
Income taxes	473		112
Other, net	415		33
Net cash provided by operating activities	4,496		3,331
Investing activities
Capital expenditures	(636)		(533)
Other, net	4		25
Net cash used for investing activities	(632)		(508)
Financing activities
Dividends paid	(1,364)		(1,260)
Repurchases of common stock	(1,015)		(500)
Issuance of long-term debt, net of related costs	1,131		—
Repayments of current and long-term debt	(1,150)		—
Repayments of commercial paper, net	—		(600)
Other, net	(125)		(68)
Net cash used for financing activities	(2,523)		(2,428)
Net change in cash and cash equivalents	1,341		395
Cash and cash equivalents at beginning of period	1,514		772
Cash and cash equivalents at end of period	$	2,855	$	1,167



	Quarter Ended June 28, 2020
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	5,474	$	2,422	$	3,259	$	2,417	$	13,572
Services	1,029		379		780		460		2,648
Total net sales	$	6,503	$	2,801	$	4,039	$	2,877	$	16,220
Net sales by contract type
Fixed-price	$	4,467	$	1,877	$	2,639	$	483	$	9,466
Cost-reimbursable	2,036		924		1,400		2,394		6,754
Total net sales	$	6,503	$	2,801	$	4,039	$	2,877	$	16,220
Net sales by customer
U.S. Government	$	5,352	$	2,098	$	2,926	$	2,533	$	12,909
International ^(a)	1,132		699		1,011		330		3,172
U.S. commercial and other	19		4		102		14		139
Total net sales	$	6,503	$	2,801	$	4,039	$	2,877	$	16,220
Net sales by geographic region
United States	$	5,371	$	2,102	$	3,028	$	2,547	$	13,048
Asia Pacific	353		72		464		16		905
Europe	506		170		170		314		1,160
Middle East	213		442		213		—		868
Other	60		15		164		—		239
Total net sales	$	6,503	$	2,801	$	4,039	$	2,877	$	16,220


	Quarter Ended June 30, 2019
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	4,740	$	1,963	$	3,023	$	2,277	$	12,003
Services	810		448		745		421		2,424
Total net sales	$	5,550	$	2,411	$	3,768	$	2,698	$	14,427
Net sales by contract type
Fixed-price	$	4,040	$	1,444	$	2,526	$	535	$	8,545
Cost-reimbursable	1,510		967		1,242		2,163		5,882
Total net sales	$	5,550	$	2,411	$	3,768	$	2,698	$	14,427
Net sales by customer
U.S. Government	$	3,476	$	1,900	$	2,675	$	2,332	$	10,383
International ^(a)	2,010		475		974		360		3,819
U.S. commercial and other	64		36		119		6		225
Total net sales	$	5,550	$	2,411	$	3,768	$	2,698	$	14,427
Net sales by geographic region
United States	$	3,540	$	1,936	$	2,794	$	2,338	$	10,608
Asia Pacific	784		86		418		23		1,311
Europe	847		103		143		328		1,421
Middle East	335		272		247		9		863
Other	44		14		166		—		224
Total net sales	$	5,550	$	2,411	$	3,768	$	2,698	$	14,427

	Six Months Ended June 30, 2019
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	9,536	$	3,879	$	6,082	$	4,476	$	23,973
Services	1,598		882		1,448		862		4,790
Total net sales	$	11,134	$	4,761	$	7,530	$	5,338	$	28,763
Net sales by contract type
Fixed-price	$	8,210	$	2,979	$	5,145	$	1,058	$	17,392
Cost-reimbursable	2,924		1,782		2,385		4,280		11,371
Total net sales	$	11,134	$	4,761	$	7,530	$	5,338	$	28,763
Net sales by customer
U.S. Government	$	6,911	$	3,533	$	5,350	$	4,568	$	20,362
International ^(a)	4,105		1,145		1,969		755		7,974
U.S. commercial and other	118		83		211		15		427
Total net sales	$	11,134	$	4,761	$	7,530	$	5,338	$	28,763
Net sales by geographic region
United States	$	7,029	$	3,616	$	5,561	$	4,583	$	20,789
Asia Pacific	1,690		208		748		31		2,677
Europe	1,645		225		341		709		2,920
Middle East	672		685		532		15		1,904
Other	98		27		348		—		473
Total net sales	$	11,134	$	4,761	$	7,530	$	5,338	$	28,763


	June 28, 2020				December 31, 2019
Materials, spares and supplies	$	564	$	532
Work-in-process	2,644		2,783
Finished goods	313		304
Total inventories	$	3,521	$	3,619



	June 27, 2021						December 31, 2020
	Total		Level 1		Level 2		Total		Level 1		Level 2
Assets
Mutual funds	$	1,398	$	1,398	$	0	$	1,335	$	1,335	$	0
U.S. Government securities	108		0		108		92		0		92
Other securities	546		344		202		555		341		214
Derivatives	34		0		34		52		0		52
Liabilities
Derivatives	37		0		37		22		0		22
Assets measured at NAV (a)
Other commingled funds	20						20


	June 28, 2020										December 31, 2019
	Total		Level 1		Level 2		Total		Level 1		Level 2
Assets
Mutual funds	$	1,099	$	1,099	$	—	$	1,363	$	1,363	$	—
U.S. Government securities	79		—		79		99		—		99
Other securities	346		153		193		319		171		148
Derivatives	50		—		50		18		—		18
Liabilities
Derivatives	28		—		28		23		—		23
Assets measured at NAV ^(a)
Other commingled funds	18						19


Exhibit No.						Description

~~3.1~~						Bylaws of Lockheed Martin Corporation, as amended and restated effective April 8, 2020 (incorporated by reference to Exhibit 3.1 to Lockheed Martin Corporation’s Current Report on Form 8-K filed with the SEC on April 9, 2020)











10.1						~~Lockheed Martin Corporation 2020~~Amendment to Outstanding Long-Term Incentive Performance ~~Award Plan (incorporated by reference to Exhibit 10.1 to Lockheed Martin Corporation’s Current Report on Form 8-K filed with the SEC on April 23, 2020)~~

~~10.2~~						~~Form of Restricted Stock Unit Award Agreement under the Lockheed Martin Corporation 2020 Incentive Performance Award Plan~~

~~10.3~~						~~Form of~~and Performance Stock Unit Award ~~Agreement (2020 - 2022 Performance Period) under the Lockheed Martin Corporation 2020 Incentive Performance Award Plan~~

~~10.4~~						~~Form of Long Term Incentive Performance Award Agreement (2020 - 2022 Performance Period) under the Lockheed Martin Corporation 2020 Incentive Performance Award Plan~~

~~10.5~~						~~CEO New Hire Restricted Stock Unit Award Agreement under the Lockheed Martin Corporation 2020 Incentive Performance Award Plan~~

~~10.6~~						~~Amendment No. 2 to Lockheed Martin Corporation Executive Severance Plan, as amended and restated effective December 1, 2016~~Agreements (effective June 24, 2021)

15						Acknowledgment of Independent Registered Public Accounting Firm

31.1						Certification of James D. Taiclet pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of Kenneth R. Possenriede pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32						Certification of James D. Taiclet and Kenneth R. Possenriede pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document contained in Exhibit 101


						Lockheed Martin Corporation
						(Registrant)

Date: July ~~21, 2020~~26, 2021						By: /s/ Brian P. Colan
						Brian P. Colan
						Vice President and Controller
						(Duly Authorized Officer and Chief Accounting Officer)