During fourth quarter 2025, we entered into an agreement with AE Industrial Partners (“AE Industrial”) to establish a new space technology company (“Space Technology disposal group”). Under the agreement we will contribute certain assets and liabilities of the Space Propulsion and Power Systems business (“SPPS business”) and the Space Avionics & Communications division (“SA&C business”), both reported in our Missile Solutions segment, to a new entity in which we will retain approximately 40% noncontrolling interest. The Space Technology disposal group, which excludes our RS-25 rocket engine and hypersonics businesses, provides premier propulsion, power, space flight avionics and communications systems. AE Industrial will acquire a controlling interest of approximately 60% in the new space technology company, at a net enterprise value of $825 million, subject to regulatory approvals and other customary closing conditions. The transaction is expected to close early in the second half of 2026.

Upon closing, we will derecognize the assets and liabilities of the Space Technology disposal group and record an equity method investment at the fair value of our retained noncontrolling interest in the newly formed entity.

The carrying amounts of the assets and liabilities of the Space Technology disposal group classified as held for sale in our Condensed Consolidated Balance Sheet were as follows:



(In millions)	July 3, 2026		January 2, 2026

Receivables, net	$	122	$	26
Contract assets	124		94
Inventories, net	10		8
Other current assets	8		11
Property, plant and equipment, net	125		115
Goodwill	285		285
Intangible assets, net	372		373
Other non-current assets	26		26
Valuation allowance	(62)		(54)
Total assets held for sale	$	1,010	$	884

Accounts payable	$	28	$	9
Contract liabilities	41		59
Compensation and benefits	8		7
Other current liabilities	18		19
Other non-current liabilities	18		19
Total liabilities held for sale	$	113	$	113

Income before income taxes attributable to the Space Technology disposal group was $28 million and $59 million for second quarter and year to date 2026, respectively, and $24 million and $38 million for second quarter and year to date 2025, respectively.

In fiscal 2026, we recorded an additional valuation allowance due to an increase in the carrying value of the disposal group and recognized a pre-tax loss of $10 million for year to date 2026, which was incremental to the previously recorded Space Technology disposal group loss recognized in fiscal 2025. The pre-tax loss is included in the “General and administrative expenses” line item in our Condensed Consolidated Statement of Operations for year to date 2026.