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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 27, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number: 1-11437 
LOCKHEED MARTIN CORPORATION
(Exact name of registrant as specified in its charter)  
Maryland   52-1893632
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer Identification No.)
6801 Rockledge Drive, Bethesda, Maryland   20817
(Address of principal executive offices)   (Zip Code)
(301) 897-6000
(Registrant’s telephone number, including area code) 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, $1 par value LMT New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act.
Large accelerated filer Accelerated filer Non–accelerated filer Smaller reporting company Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
There were 276,916,491 shares of our common stock, $1 par value per share, outstanding as of July 20, 2021.



Lockheed Martin Corporation
Form 10-Q
For the Quarterly Period Ended June 27, 2021
Table of Contents  
    Page
ITEM 1.
3
4
5
6
 7
8
9
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 6.



PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Lockheed Martin Corporation
Consolidated Statements of Earnings
(unaudited; in millions, except per share data)
  Quarters Ended Six Months Ended
June 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   —  (36) — 
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 
The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

Lockheed Martin Corporation
Consolidated Statements of Comprehensive Income
(unaudited; in millions)
  Quarters Ended Six Months Ended
  June 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 
The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

Lockheed Martin Corporation
Consolidated Balance Sheets
(in millions, except par value)
June 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 
The accompanying notes are an integral part of these unaudited consolidated financial statements.

5

Lockheed Martin Corporation
Consolidated Statements of Cash Flows
(unaudited; in millions)
  Six Months Ended
June 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   128 
Severance and restructuring charges 36  — 
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 
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   1,131 
Repayments of current and long-term debt   (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 
The accompanying notes are an integral part of these unaudited consolidated financial statements.

6

Lockheed Martin Corporation
Consolidated Statements of Equity
For the Quarters Ended June 27, 2021 and June 28, 2020
(unaudited; in millions)
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders’
Equity
Noncontrolling
Interests in
Subsidiary
Total
Equity
Balance at 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  $ —  $ 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  $ —  $ 18,876  $ (15,403) $ 3,751  $ 35  $ 3,786 
The accompanying notes are an integral part of these unaudited consolidated financial statements.

7

Lockheed Martin Corporation
Consolidated Statements of Equity
For the Six Months Ended June 27, 2021 and June 28, 2020
(unaudited; in millions)
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders’
Equity
Noncontrolling
Interests in
Subsidiary
Total
Equity
Balance at December 31, 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  $ —  $ 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
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 
The accompanying notes are an integral part of these unaudited consolidated financial statements.

8

Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited)


NOTE 1 - BASIS OF PRESENTATION
We prepared these consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission (SEC) Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.
In the opinion of management, these consolidated financial statements reflect all adjustments that are of a normal recurring nature necessary for a fair presentation of our results of operations, financial condition, and cash flows for the interim periods presented. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates. Significant estimates inherent in the preparation of our consolidated financial statements include, but are not limited to, accounting for sales and cost recognition; postretirement benefit plans; environmental liability and assets for the portion of environmental costs that are probable of future recovery; evaluation of goodwill, intangible assets, investments and other assets for impairment; income taxes including deferred tax assets; fair value measurements; and contingencies. The consolidated financial statements include the accounts of subsidiaries we control and variable interest entities if we are the primary beneficiary. We eliminate intercompany balances and transactions in consolidation.
We close our books and records on the last Sunday of the interim calendar quarter to align our financial closing with our business processes. The consolidated financial statements and tables of financial information included herein are labeled based on that convention. This practice only affects interim periods as our fiscal year ends on December 31.
The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the full year or future periods. Unless otherwise noted, we present all per share amounts cited in these consolidated financial statements on a “per diluted share” basis. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Form 10-K).
NOTE 2 - PENDING ACQUISITION OF AEROJET ROCKETDYNE
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.
9


Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
NOTE 3 - EARNINGS PER COMMON SHARE
The weighted average number of shares outstanding used to compute earnings per common share were as follows (in millions):
  Quarters Ended Six Months Ended
June 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 no significant anti-dilutive equity awards during the quarters and six months ended June 27, 2021 or June 28, 2020.
NOTE 4 - INFORMATION ON BUSINESS SEGMENTS
We operate in four business segments: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. We organize our business segments based on the nature of products and services offered.
Net sales and operating profit of our business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation. Business segment operating profit includes our share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of our business segments.
Business segment operating profit also excludes the FAS/CAS pension operating adjustment, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, stock-based compensation expense, retiree benefits, significant severance actions, significant asset impairments, gains or losses from divestitures, and other miscellaneous corporate activities. Excluded items are included in the reconciling item “Unallocated items” between operating profit from our business segments and our consolidated operating profit. See “Note 11 - Other” for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments.
10


Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
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   —  (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 
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) $ —  $ (1) $ — 
Missiles and Fire Control   —  (1) (1)
Rotary and Mission Systems (58) (58) (116) (116)
Space (22) (7) (44) (14)
Total amortization of purchased intangibles $ (81) $ (65) $ (162) $ (131)
11


Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
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 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 and total CAS pension cost. The non-service FAS pension income component is included in other non-operating income, 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, we have a favorable FAS/CAS operating adjustment.
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 



12


Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
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    308 
Total net sales $ 6,666  $ 2,944  $ 4,242  $ 3,177  $ 17,029 
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    587 
Total net sales $ 13,053  $ 5,693  $ 8,349  $ 6,192  $ 33,287 
(a)International sales include FMS contracted through the U.S. Government and direct commercial sales to international governments and other international customers.
13


Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)

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  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 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  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.
14


Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
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.
Total assets for each of our business segments were as follows (in millions):
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 
(a)Corporate assets primarily include cash and cash equivalents, deferred income taxes, assets for the portion of environmental costs that are probable of future recovery and investments held in a separate trust.
NOTE 5 - CONTRACT ASSETS AND LIABILITIES
Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. Contract liabilities include advance payments and billings in excess of revenue recognized. Contract assets and contract liabilities were as follows (in millions):
June 27,
2021
December 31,
2020
Contract assets $ 11,425  $ 9,545 
Contract liabilities 7,379  7,545 
Contract assets increased $1.9 billion during the six months ended June 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 27, 2021 for which we have not yet billed our customers. There were no significant credit or impairment losses related to our contract assets during the quarters and six months ended June 27, 2021 and June 28, 2020.
Contract liabilities decreased $166 million during the six months ended June 27, 2021, primarily due to revenue recognized in excess of 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 at December 31, 2019 as revenue.
NOTE 6 - INVENTORIES
Inventories consisted of the following (in millions):
June 27,
2021
December 31,
2020
Materials, spares and supplies $ 621  $ 612 
Work-in-process
2,290  2,693 
Finished goods 208  240 
Total inventories $ 3,119  $ 3,545 
Costs incurred to fulfill a contract in advance of the contract being awarded are included in inventories as work-in-process if we determine that those costs relate directly to a contract or to an anticipated contract that we can specifically
15


Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
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 27, 2021 and December 31, 2020, $693 million and $583 million of pre-contract costs were included in inventories.
NOTE 7 - POSTRETIREMENT BENEFIT PLANS
Our pretax net periodic benefit income related to our qualified defined benefit pension plans and retiree medical and life insurance plans consisted of the following (in millions):
  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  $ $ 7  $
Interest cost 13  17  26  35 
Expected return on plan assets (35) (32) (70) (64)
Recognized net actuarial gains   (1)   (2)
Amortization of prior service costs 9  18  19 
Total net periodic benefit income $ (9) $ (3) $ (19) $ (5)
We record the service cost component of net periodic benefit income as part of cost of sales and the non-service cost components of net periodic benefit income as part of other non-operating income, net in the consolidated statements of earnings.
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 ($3 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) were reclassified from accumulated other comprehensive loss (AOCL) and recorded as a component of net periodic benefit 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 were recorded on our consolidated statements of comprehensive income as an increase to other comprehensive income.
The required funding of our qualified defined benefit pension plans is determined in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), as amended, along with consideration of CAS and Internal Revenue Code rules. There were no contributions to our qualified defined benefit pension plans during the quarters and six months ended June 27, 2021 and June 28, 2020.
NOTE 8 - LEGAL PROCEEDINGS AND CONTINGENCIES
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
16


Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
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.
Legal Proceedings

United States of America, ex rel. Patzer; Cimma v. Sikorsky Aircraft Corp., et al
As a result of our acquisition of Sikorsky Aircraft Corporation (Sikorsky), we assumed the defense of and any potential liability for two 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 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 two 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.
The U.S. Government seeks damages of approximately $52 million, subject to trebling, plus statutory penalties. We believe that we have legal and factual defenses to the U.S. Government’s remaining claims. Although we continue to evaluate our liability and exposure, we do not currently believe that it is probable that we will incur a material loss. If, contrary to our expectations, the U.S. Government prevails in this matter and proves damages at or near $52 million and is successful in having such damages trebled, the outcome could have an adverse effect on our results of operations in the period in which a liability is recognized and on our cash flows for the period in which any damages are paid.
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Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)

Lockheed Martin 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.
Environmental Matters
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 or adjusted.
At June 27, 2021 and December 31, 2020, the aggregate amount of liabilities recorded relative to environmental matters was $778 million and $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 $675 million and $685 million at June 27, 2021 and December 31, 2020, most of which are recorded in other noncurrent assets on our consolidated balance 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 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 reasonably possible loss or range of loss. We project costs and recovery of costs over approximately 20 years.
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Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
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 their capacity as PRPs under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).
In addition to the proceedings and potential proceedings discussed above, the California 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) was challenged and withdrawn, and is also reevaluating its existing drinking water standard of 6 ppb for perchlorate. The U.S. Environmental Protection Agency decided in June 2020 not to regulate perchlorate in drinking water at the federal 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 also are evaluating the potential impact of existing and contemplated legal requirements addressing a class of compounds known generally as per- and polyfluoroalkyl compounds (PFAS). PFAS compounds have been used ubiquitously, such as in fire-fighting foams, manufacturing processes, and stain- and stick-resistant products (e.g., Teflon, stain-resistant fabrics). Because we have used products and processes over the years containing some of those compounds, they likely exist as contaminants at many of our environmental remediation sites. Governmental authorities have announced plans, and in some instances have begun, to regulate certain of these compounds at extremely low concentrations in drinking water, which could lead to increased cleanup costs at many of our environmental remediation sites.
Letters of Credit, Surety Bonds and Third-Party Guarantees
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 $3.4 billion at June 27, 2021 and December 31, 2020. Third-party guarantees do not include guarantees issued on behalf of subsidiaries and other consolidated entities.
At June 27, 2021 and December 31, 2020, third-party guarantees totaled $852 million and $871 million, of which approximately 70% and 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.
In determining our exposures, we evaluate the reputation, performance on contractual obligations, technical capabilities and credit quality of our current and former joint venture partners and the transferee under novation agreements all of which include a guarantee as required by the FAR. At June 27, 2021 and December 31, 2020, there were no material amounts recorded in our financial statements related to third-party guarantees or novation agreements.
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Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
NOTE 9 - FAIR VALUE MEASUREMENTS
Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following (in millions):
June 27, 2021 December 31, 2020
Total Level 1 Level 2 Total Level 1 Level 2
Assets
Mutual funds $ 1,398  $ 1,398  $   $ 1,335  $ 1,335  $ — 
U.S. Government securities 108    108  92  —  92 
Other securities 546  344  202  555  341  214 
Derivatives 34    34  52  —  52 
Liabilities
Derivatives 37    37  22  —  22 
Assets measured at NAV (a)
Other commingled funds 20      20     
(a)Net Asset Value (NAV) is the total value of the fund divided by the number of the fund’s shares outstanding.
Substantially all assets measured at fair value, other than derivatives, represent investments held in a separate trust to fund certain of our 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.
We use derivative instruments 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 hedge changes in the fair value of 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 foreign currency hedges at June 27, 2021 and December 31, 2020 was $3.6 billion and $3.4 billion. The aggregate notional amount of our outstanding interest rate swaps was $722 million and $572 million at June 27, 2021 and December 31, 2020. The fair values of our outstanding foreign currency hedges and interest rate swaps at June 27, 2021 and December 31, 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 27, 2021 and June 28, 2020. Substantially all of our derivatives are designated for hedge accounting.
In addition to the financial instruments listed in the table above, we hold other financial instruments, including cash and cash equivalents, receivables, accounts payable and debt. The carrying amounts for cash and cash equivalents, receivables and accounts payable approximated their fair values. The estimated fair value of our outstanding debt was
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Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
$16.1 billion and $16.9 billion at June 27, 2021 and December 31, 2020. The outstanding principal amount of debt was $13.3 billion at both June 27, 2021 and December 31, 2020, excluding $1.1 billion of unamortized discounts and issuance costs at both June 27, 2021 and December 31, 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).
NOTE 10 - STOCKHOLDERS’ EQUITY
Repurchases of Common Stock
During the six months ended June 27, 2021, we repurchased 4.2 million shares of our common stock for $1.5 billion under accelerated share repurchase plans (ASR) pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934. The total remaining authorization for future common share repurchases under our share repurchase program was $1.5 billion as of June 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.
Dividends
We declared cash dividends totaling $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 may differ due to timing of dividend-equivalents paid on RSUs and 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.
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Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)

Accumulated Other Comprehensive Loss (AOCL)
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   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 — 
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)
(a)Reclassifications from AOCL related to our postretirement benefit plans were recorded as a component of net periodic benefit income for each period presented (see “Note 7 - Postretirement Benefit Plans”). These amounts include $140 million and $110 million, net of tax, for the quarters ended June 27, 2021 and June 28, 2020, which are comprised of the recognition of net actuarial losses of $204 million and $172 million for the quarters ended June 27, 2021 and June 28, 2020, and the amortization of net prior service credits of $64 million and $62 million for the quarters ended June 27, 2021 and June 28, 2020.
NOTE 11 - OTHER
Changes in Estimates
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
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Lockheed Martin Corporation
Notes to Consolidated Financial Statements (unaudited) (continued)
estimates of the transaction price, a provision for the entire loss is determined at the contract level and is recorded in the period in which the loss is determined.
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 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 quarters and six months ended June 28, 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. 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, 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 2020 Form 10-K, we are responsible for a program to design, develop and construct a ground-based radar at our RMS business segment, and the program has experienced performance issues for which we have periodically accrued reserves. During 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 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. Based on the current amount of losses recorded and our current