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. In 2017, 69%2021, 71% of our $51.0$67.0 billion in net sales were from the U.S. Government, either as a prime contractor or as a subcontractor (including 58%62% from the Department of Defense (DoD)), 30%28% 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.

We operate in an environment characterized by both increasing complexity in global security and continuing economic pressures in the U.S. and globally. A significant component of our strategy in this environment is to focus on program execution, improving the quality and predictability of the delivery of our products and services, and placing security capability quickly into the hands of our U.S. and international customers at affordable prices. Recognizing that our customers are resource constrained, we areplace considerable focus on affordability initiatives while endeavoring to develop and extend our portfolio domestically in a disciplined manner, with a focus on adjacent markets close to our core capabilities as well as growing our international sales. We continue to focus on affordability initiatives. We also expect to continue to invest in technologies to fulfill new mission requirements for our customers and investsubstantially in our people so thatto ensure we have the technical skills necessary to succeed.succeed, and we expect to continue to invest internally on innovative technologies that address rapidly evolving mission requirements for our customers. We will continue to invest in acquisitions, as appropriate, while deepening our connection to commercial industry through cooperative partnerships, joint ventures, and equity investments.

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

In 2017,2021, our Aeronautics business segment generated net sales of $20.1$26.7 billion, which represented 39%40% of our total consolidated net sales. Aeronautics’ customers include the military services, principally the U.S. Air Force and U.S. Navy, and various other government agencies of the U.S. and other countries.countries, as well as commercial and other customers. In 2017,2021, U.S. Government customers accounted for 63%,65% and international customers accounted for 36% and U.S. commercial and other customers accounted for 1%35% of Aeronautics’ net sales. Net sales from Aeronautics’ combat aircraft products and services represented 30%32% of our total consolidated net sales in 20172021 and 28%2019, and 33% in both 2016 and 2015.2020.

Aeronautics is engaged in the research, design, development, manufacture, integration, sustainment, support and upgrade of advanced military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies. Aeronautics also has contracts with the U.S. Government for classified programs. Aeronautics’ major programs include:

The F-35 program is our largest program, generating 25%27% of our total consolidated net sales, as well as 64%68% of Aeronautics’ net sales in 2017.2021. The F-35 program consists of multiple development, contracts, multiple production contracts, and sustainment activities. The development contracts are being performed concurrently with the production contracts. Concurrent performanceDevelopment is focused on modernization of developmentF-35’s capability and production contracts is used for complex programs to test aircraft, shorten the time to field systems and achieve overall cost savings. The System Development and Demonstration (SDD) portion of the development contracts was substantially completed in 2017, with over 99% of flight test objectives met through over 9,200 flights. Approximately 70 flights remain and are expected to be completed in early 2018. Additionally, the finaladdressing emerging threats. Sustainment provides logistics and training capability is plannedsupport for 2018 and new Third Life structural testing addedthe aircraft delivered to the SDD portion in 2013 is scheduled to be completed in 2019. F-35 customers.

Production of the aircraft is expected to continue for many years given the U.S. Government’s current inventory objective of 2,456 aircraft for the U.S. Air Force, U.S. Marine Corps and U.S. Navy; commitments from our eightseven international partnerspartner countries and threesix international customers; as well asand expressions of interest from other countries. During 2017,In 2021, we delivered 66142 aircraft, including 68 to our U.S. and international partners,customers, resulting in total deliveries of 266753 production aircraft since program inception. This was an increase from the 120 aircraft delivered in 2020 when the production rate was tapered as a result of December 31, 2017.coronavirus disease 2019 (COVID-19) related delays. While the production rate in 2021 improved from its 2020 levels, it continued to be impacted by COVID-19. We anticipate delivering 148-153 aircraft in 2022. In 2023 and beyond, we anticipate delivering 156 aircraft for the foreseeable future. We have 235 production230 aircraft in backlog as of December 31,

Aeronautics produces and provides support and sustainment services for the C-130J Super Hercules, as well as upgrades and support services for the legacy C-130 Hercules worldwide fleet. We delivered 2622 C-130J aircraft in 2017, including seven to international customers.2021. We have 6479 aircraft in our backlog as of December 31, 2017 with advanced funding from customers for additional C-130J aircraft not currently in backlog. Our C-130J backlog extends2021, extending into 2020.2025.

While production and deliveries ofAeronautics produces F-16 aircraft were completed in 2017 from our Fort Worth, Texas facilities, Aeronauticsfor international customers and continues to provide service-life extension, modernization and other upgrade programs for our customers’ F‑16 aircraft, with existing contracts continuing for several years. We delivered eightAs of December 31, 2021, we have 128 F-16 aircraft in 2017 andbacklog, extending into 2027. We continue to seek international opportunities to deliver additional aircraft. In November 2017, the U.S. and Bahrain signed a government-to-government agreement, or a Letter of Offer and Acceptance (LOA), regarding the sale of new production Block 70 aircraft for the Royal Bahraini Air Force. We are transitioning F-16 production to Greenville, South Carolina, to support the Bahrain production program and other emerging F-16 production requirements.

While production and deliveries of F-22 aircraft were completed in 2012, Aeronautics continues to provide modernization and sustainment activities for the U.S. Air Force’s F-22 aircraft fleet. The modernization program comprises upgrading existing systems requirements, developing new systems requirements, adding capabilities and enhancing the performance of the weapon systems. The sustainment program consists of sustaining the weapon systems of the F-22 fleet, providing training systems, customer support, integrated support planning, supply chain management, aircraft modifications and heavy maintenance, systems engineering and support products.

In 2017,2021, our MFC business segment generated net sales of $7.2$11.7 billion, which represented 14%17% of our total consolidated net sales. MFC’s customers include the military services, principally the U.S. Army, and various government agencies of the U.S. and other countries, as well as commercial and other customers. In 2017,2021, U.S. Government customers accounted for 64%,71% and international customers accounted for 34% and U.S. commercial and other customers accounted for 2%29% of MFC’s net sales.

MFC provides air and missile defense systems; tactical missiles and air-to-ground precision strike weapon systems; logistics; fire control systems; mission operations support, readiness, engineering support and integration services; manned and

In 2017,2021, our RMS business segment generated net sales of $14.2$16.8 billion, which represented 28%25% of our total consolidated net sales. RMS’ customers include the military services, principally the U.S. ArmyNavy and Navy,Army, and various government agencies of the U.S. and other countries, as well as commercial and other customers. In 2017,2021, U.S. Government customers accounted for 69%70%, international customers accounted for 28% and U.S. commercial and other customers accounted for 3%2% of RMS’ net sales. Net sales from RMS’ Sikorsky helicopter programs represented 10% of our consolidated net sales in 2021, and 9% in 2020 and 2019. RMS also has contracts with the U.S. Government for classified programs.

RMS provides design, manufacture, servicedesigns, manufactures, services and support for a variety ofsupports various military and commercial helicopters; ship and submarine mission and combat systems; mission systems and sensors for rotary and fixed-wing aircraft;helicopters, surface ships, sea and land-based missile defense systems;systems, radar systems; the Littoral Combat Ship (LCS);systems, sea and air-based mission and combat systems, command and control mission solutions, cyber solutions, and simulation and training services; and unmanned systems and technologies. In addition, RMS supports the needs of government customers in cybersecurity and delivers communications and command and control capabilities through complex mission solutions for defense applications.solutions. RMS’ major programs include:

In 2017,2021, our Space business segment generated net sales of $9.5$11.8 billion, which represented 19%18% of our total consolidated net sales. Space’s customers include the U.S. Air Force, U.S. Space Force, U.S. Navy, National Aeronautics and Space Administration (NASA), Missile Defense Agency (MDA) and various government agencies of the U.S. Government agencies and other countries along with commercial customers. In 2017,2021, U.S. Government customers accounted for 85%,92% and international customers

Space is engaged in the research and development, design, engineering and production of satellites, space transportation systems, and strategic, advanced strike, and defensive missile systems and space transportation systems. Space provides network-enabled situational awareness and integrates complex space and ground global systems to help our customers gather, analyze and securely distribute critical intelligence data. Space is also responsible for various classified systems and services in support of vital national security systems. Space’s major programs include:

We routinely apply for and own a substantial number of U.S. and foreign patents and trademarks related to the products and services we provide. In addition to owning a large portfolio of patents and trademarks, we develop and own other intellectual property, including trademarks, copyrights, trade secrets and know-how. Unpatented research, development and engineering skills also make an important contributionknow-how, which contribute significantly to our business. We also license intellectual property to and from third parties. The Federal Acquisition Regulation (FAR) providesand Defense Federal Acquisition Regulation Supplement (DFARS) provide that the U.S. Government has licensesobtains certain rights in our intellectual property, including patents, that are developed by us and our subcontractors and suppliers in performance of government contracts or with government funding, and itfunding. The U.S. Government may use or authorize others, including competitors, to use such intellectual property, commonly referredproperty. See the discussion of matters related to as government use rights. The U.S. Government is taking increasingly aggressive positions under the FAR both as to whatour intellectual property they believe such rights apply and to acquire broad license rights to use and have others use such intellectual property. If the U.S. Government is successful in these efforts, this could affect our ability to compete and to obtain access to and use certain supplier intellectual property. Foreignwithin Item 1A - Risk Factors. Non-U.S. governments may also have certain rights in patents and other intellectual property developed in performance of foreign government contracts.our contracts for them. Although our intellectual property rights in the aggregate are important to the operation of our business, we do not believe that any existing patent, license or other intellectual property right is of such importance that its loss or termination would have a material adverse effect on our business taken as a whole.

Some of our products require relatively scarce raw materials. Historically, we have been successful in obtaining the raw materials and other supplies needed in our manufacturing processes. We seek to manage raw materials supply risk through long-term contracts and by maintaining an acceptable level of the key materials in inventories.

Aluminum and titanium are important raw materials used in certain of our Aeronautics and Space programs. Long-term agreements have helped enable a continued supply of aluminum and titanium. Carbon fiber is an important ingredient in composite materials used in our Aeronautics programs, such as the F-35 aircraft. We have been advised by some suppliers that pricing and the timing of availability of materials in some commodities markets can fluctuate widely. These fluctuations may

No material portion of our business is considered to be seasonal. Various factors can affect the distribution of our sales between accounting periods, including the timing of government awards, the availability of government funding, product deliveries and customer acceptance.

Our business is heavily regulated. We contract with numerous U.S. Government agencies and entities, principally all branches of the U.S. military and NASA. We also contract with similar government authorities in other countries and they regulate our non-FMS international efforts.sales. Additionally, our commercial aircraft products are required to comply with U.S. and international regulations governing production and quality systems, airworthiness and installation approvals, repair procedures and continuing operational safety.

The U.S. Government and other governments may terminate any of our government contracts and subcontracts either at its convenience or for default based on our performance. If a contract is terminated for convenience, we generally are protected by provisions covering reimbursement for costs incurred on the contract and profit on those costs. If a contract is terminated for default, we generally are entitled to payments for our work that has been accepted by the U.S. Government or other governments; however, the U.S. Government and other governments could make claims to reduce the contract value or recover its procurement costs and could assess other special penalties. For more information regarding the U.S. Government’s and other governments’ right to terminate our contracts and the risks of doing work internationally, see Item 1A - Risk Factors. For more information regarding government contracting laws and regulations, see Item 1A - Risk Factors as well as “Critical Accounting Policies - Contract Accounting / Sales Recognition” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. For more information on the risks of doing work internationally, see Item 1A - Risk Factors.

Additionally, our programs for the U.S. Government may also enter intooften operate for periods of time under undefinitized contract actions (UCAs), which means that we begin performing our obligations before the terms, specifications or price are finally agreed to between the parties. Although in most cases we historically have reached mutual agreement to definitize our UCAs, the U.S. Government has the ability to unilaterally definitize contracts and has done so in the past. Absent a successful appeal of such action, the unilateral definitization of the contract actions. Thisobligates us to perform under terms and conditions imposed by the U.S. Government. The U.S. Government’s power to unilaterally definitize a contract can affect our ability to negotiate mutually agreeable contract terms and, if a contract is unilaterally imposed upon us, it may negatively affect our expected profit and cash flows on a program or impose burdensome terms.

A portion of our business is classified by the U.S. Government and cannot be specifically described. The operating results of these classified contracts are included in our consolidated financial statements. The business risks and capital requirements associated with classified contracts historically have not differed materially from those of our other U.S. Government contracts. Our internal controls addressing the financial reporting of classified contracts are consistent with our internal controls for our non-classified contracts.

Our operations are subject to and affected by various federal, state, local and foreign environmental protection laws and regulations regarding the discharge of materials into the environment or otherwise regulating the protection of the environment. As a result of these environmental protection laws, we are involved in environmental remediation at some of our current and former facilities and at third-party-owned sites where we have been designated a potentially responsible party as a result of our prior activities and those of our predecessor companies. While the extent of our financial exposure cannot in all cases be reasonably estimated, the costs of environmental compliance have not had, and we do not expect that these costs will have, a material adverse effect on our earnings, financial position and cash flow, primarily because mostsubstantially all of our environmental costs are allowable in establishing the price of our products and services under our contracts with the U.S. Government. For information regarding these matters, including current estimates of the amounts that we believe are required for remediation or cleanup to the extent that they are probable and estimable, see “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” included in our Notes to Consolidated Financial Statements. See also the discussion of environmental matters within Item 1A - Risk Factors.

Throughout this Form 10-K, we incorporate by reference information from parts of other documents filed with the U.S. Securities and Exchange Commission (SEC). The SEC allows us to disclose important information by referring to it in this manner.

This Form 10-K 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.

Statements and assumptions with respect to future sales, income and cash flows, program performance, the outcome of litigation, anticipated pension cost and funding, environmental remediation cost estimates, planned acquisitions or dispositions

An investment in our common stock or debt securities involves risks and uncertainties. We seek to identify, manage and mitigate risks to our business, but risk and uncertainty cannot be eliminated or necessarily predicted. The outcome of one or more of these risks could have a material effect on our operating results, financial position, or cash flows. You should carefully consider the following factors, in addition to the other information contained in this Annual Report on Form 10-K, before deciding to purchase our common stock or debt securities.

We derived 69%71% of our total consolidated net sales from the U.S. Government in 2017,2021, including 58%62% from the Department of Defense (DoD).DoD. We expect to continue to derive most of our sales from work performed under U.S. Government contracts. Those contracts are conditioned upon the continuing availability of Congressional appropriations. Congress usually appropriates funds on a fiscal-yearfiscal year (FY) basis even though contract performance may extend over many years. Consequently, contracts are often partially funded initially and additional funds are committed only as Congress makes further appropriations.appropriations over time. If we incur costs in excess of funds obligated on a contract or in advance of a contract award, we may be at risk of not being reimbursed for reimbursement of those costs unless and until additional funds are obligated under the contract or the contract is awarded and funded.

Budget uncertainty, the risk of future budget cuts, the potential for U.S. Government shutdowns, the use of continuing resolutions, and the federal debt ceiling can adversely affect our industry and the funding for our programs. If appropriations were delayed or a government shutdown were to occur and were to continue for an extended period of time, we could be at risk of program cancellations and other disruptions and nonpayment. When the contract.U.S. Government operates under a continuing resolution, new contract and program starts are restricted and funding for our programs may be unavailable, reduced or delayed. Shifting funding priorities or federal budget compromises, could also result in reductions in overall defense spending on an absolute or inflation-adjusted basis, which could adversely impact our business. Our business could also be adversely impacted by reductions or delays in spending by non-U.S. government customers who are facing budget pressures.

The F-35 program, which consists of multiple development, production and sustainment contracts, is our largest program and represented 25%27% of our total consolidated net sales in 2017 and is expected to represent a higher percentage of our sales in future years.2021. A decision by the U.S. Government or other governments to cut spending on this program or reduce or delay planned orders would have an adverse impact on our business and results of operations. 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 partners’countries’ oversight and budgeting processes. Current program challenges include but are not limited to, increasing manufacturing capabilities to meet higher customer demand for new aircraft and sustainment activities, supplier, Lockheed Martin and partner performance (including COVID-19 performance-related challenges), software development, levelthe receipt of cost associated with life cycle operations and sustainment and warranties, successfully negotiating and receiving funding for production contracts on a timely basis, executingexecution of future flight tests and findings resulting from testing and operating the aircraft. Additionally,aircraft, the U.S. Government may also enter into unilateral contract actions. A unilateral contract action obligates uslevel of cost associated with life cycle operations, sustainment and potential contractual obligations, and the ability to perform under termscontinue to reduce the unit production costs and conditions imposedimprove affordability.

Our planned production rates and deliveries have been affected and could continue to be affected by the U.S. Government. Unilateral contract actions could negatively affect profit and cash flows, and establish a precedent for future contracts.

We must comply with and are affected by laws and regulations relating to the award, administration and performance of U.S. Government contracts. Government contract laws and regulations affect how we do business with our customers and impose certain risks and costs on our business. A violation of specificthese laws and regulations by us, our employees, others working on our behalf, a supplier or a joint venture partner could harm our reputation and result in the imposition of fines and penalties, the termination of our contracts, suspension or debarment from bidding on or being awarded contracts, loss of our ability to export products or perform services and civil or criminal investigations or proceedings. In addition, costs to comply with new government regulations can increase our costs, reduce our margins and affect our competitiveness.

In some instances, theseGovernment contract laws and regulations can impose terms or rightsobligations that are different fromthan those typically found in commercial transactions. For example, the U.S. Government may terminate any of our government contracts and subcontracts either at its convenience ornot only for default based on our performance.performance but also at its convenience. Upon termination for convenience of a fixed-price type contract, typically we normally

A termination arising out of our default may expose us to liability and have a material adverse effect on our ability to compete for future contracts and orders. In addition, on those contracts for which we are teamed with others and are not the prime contractor, the U.S. Government could terminate a prime contract under which we are a subcontractor, notwithstanding the fact that our performance and the quality of the products or services we delivered were consistent with our servicescontractual obligations as a subcontractor. In the case of termination for default, the U.S. Government could make claims to reduce the contract value or recover its procurement costs and could assess other special penalties. However,

Our programs for the U.S. Government often operate for periods of time under such circumstancesUndefinitized Contract Actions (UCAs), which means that we have rightsbegin performing our obligations before the terms, specifications or price are finally agreed to between the parties. The U.S. Government has (and has exercised in the past) the ability to unilaterally definitize contracts, which, absent a successful appeal, obligates us to perform under terms and remedial actions under lawsconditions imposed by the U.S. Government. This can affect our ability to negotiate mutually agreeable contract terms and, the Federal Acquisition Regulation (FAR).if a contract is unilaterally imposed upon us, it may negatively affect our expected profit and cash flows on a program or impose burdensome terms.

In addition, certainCertain of our U.S. Government contracts span one or more base years and include multiple option years. The U.S. Government generally has the rightmay decide not to exercise option periods, and may not exercise an option period for various reasons. However, thewhich could result in a loss of expected sales or profits. The U.S. Government also may decide to exercise option periods even for contracts forunder which it is expected that our costs may exceed the contract price or ceiling.ceiling, which could result in losses or unreimbursed costs.

The U.S. Government hascould implement procurement policies that negatively impact our profitability or the ability to decreasewin new business. Changes in procurement policy favoring more incentive-based fee arrangements, different award fee criteria or withholdgovernment contract negotiation offers based upon the customer’s view of what our costs should be (as compared to our actual costs) may affect the predictability of our profit rates or make it more difficult to compete on certain types of programs. In addition, changes in contract financing policy for fixed-price contracts, such as changes in performance and progress payments whenpolicies, including a reversal or modification of the DoD’s March 2020 increase to the applicable progress payment rate from 80% to 90%, could significantly affect the timing of our cash flows. Our customers also may seek to negotiate non-traditional contract provisions or contract types. The U.S. Government’s preference for fixed-price contracting has resulted in what we believe to be the inappropriate application of fixed-priced contracting methods to development programs. By their nature, the

The DoD is increasingly pursuing rapid acquisition pathways and procedures for new technologies, including through so called “other transaction authority” agreements (OTAs). While OTAs do not currently represent a significant portion of our overall contracts (less than 2% of total backlog), in recent years the DoD has increased the frequency of use and the size of OTAs and we expect this trend to continue. OTAs are exempt from many traditional procurement laws, including the FAR, and may be used, subject to its reviewcertain conditions, for research, prototype development and follow-on production for a successful prototype. The conditions to award OTAs include, in certain instances, that a significant portion of the work under the OTA is performed by a non-traditional defense contractor or that a portion of the cost of the protype project is funded by non-governmental sources. If we cannot successfully adapt to the DoD’s rapid acquisition processes or if the DoD significantly increases the use of OTAs with non-traditional defense contractors or increasingly mandates cost sharing, then we may lose strategic new business opportunities in high-growth areas and our future performance and results could be inadequate. Additionally, any costs found to be misclassified may be subject to repayment. We have unaudited and/or unsettled incurred cost claims related to past years, which places riskadversely affected. Our success also depends on our ability to issue final billings on contracts for which authorizedcontinue to identify technological innovation and appropriated funds may be expiring.

Our profitability and cash flow may vary materially depending on the types of government contracts undertaken, the nature of products produced or services performed under those contracts, the costs incurred in performing the work, the achievement of other performance objectives and the stage of performance at which the right to receive fees is determined, particularly under award and incentive-fee contracts.

Contract types primarily include fixed-price and cost-reimbursable contracts. Under each type of contract, if we are unable to control costs, including due to greater than anticipated inflation or unexpected delays, our operating results could be adversely affected, particularly if we are unable to demonstrate an increase in contract value to our customers. Cost overruns or the failure to perform on existing programs also may adversely affect our ability to retain existing programs and win future contract awards, or could cause the customer to terminate the contract for convenience. Given broader inflation in the economy, we are monitoring the risk inflation presents to active and future contracts. To date we have not seen broad based increases in costs from inflation that are intendedmaterial to address changing risk and reward profilesthe business as a program matures. Contract types include cost-reimbursable,whole; however, if we began to experience greater than expected supply chain and labor inflation our profits and margins under our contracts, in particular fixed price contracts, could be adversely affected.

Under fixed-price incentive-fee,contracts, we agree to perform specified work for a pre-determined price. If our actual costs exceed our estimates our profits are reduced and we could incur a loss. Some fixed-price contracts have a performance-based component under which we may earn incentive payments or incur financial penalties based on our performance. For additional risks related to the DoD’s current use of fixed-price contracts see the risk factor above. See Note 1 – Organization and time-and-materials contracts.Significant Accounting Policies included in our Notes to Consolidated Financial Statements for further details about losses incurred on certain fixed-price programs to date. Cost-reimbursable contracts provide for the payment of allowable costs incurred during performance of the contract plus a fee up to a ceiling based on the amount that has been funded. Contracts for development programs with complex design and technical challenges are typicallyoften cost-reimbursable. Under cost-reimbursable contracts, we are reimbursed for allowable costs and paid a fee, which may be fixed or performance-based. In these cases, the associated financial risks primarily relate to a reduction in fees and thepotential program could be canceledcancellation if cost, schedule or technical performance issues arise.

U.S. Government agencies, including the Defense Contract Audit Agency, the Defense Contract Management Agency and various agency Inspectors General, routinely audit and investigate government contractors. These agencies review a contractor’s performance under its contracts, we receive a fixed price regardless ofits cost structure, its business systems and its compliance with applicable laws, regulations and standards. The U.S. Government has the actual costs we incur. We haveability to absorbdecrease or withhold certain payments when it deems systems subject to its review to be inadequate. Additionally, any costs in excessfound to be misclassified may be subject to repayment and from time to time we have had substantial disagreements with government auditors regarding the allowability of the fixed price. Under time-and-materialscosts incurred by us under government contracts, we are paid for labor at negotiated hourly billing rates and for certain expenses.

If an audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including reductions of costs incurred on athe value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, penalties, fines, suspension, or prohibition from doing business with the U.S. Government. In addition, we could suffer serious reputational harm if allegations of impropriety were made against us. Similar government oversight and thus affects the timing ofrisks to our cash flows.business and reputation exist in most other countries where we conduct business.

We may encounter significant expenses, delays, contract modifications or bid protests from unsuccessful bidders on new program awards.awards seeking to overturn the award. Unsuccessful bidders are more frequently protesting inalso may protest with the hopegoal of being awarded a subcontract for a portion of the work in return for withdrawing the protest. Bid protests couldcan result in significant expenses to us, contract modifications or even loss of the contract award. Even where a bid protest does not result in the loss of a contract award and the resolution can extend the time until the contract activity can begin and as a result, delay our recognizingthe recognition of sales. We also may not be successful in ourOur efforts to protest or challenge any bids for contracts that were not awarded to us also may be unsuccessful and could result in our incurrence of significant expense.

The coronavirus disease 2019 (COVID-19) pandemic continues to present business challenges, and we continue to experience impacts related to COVID-19, primarily in increased coronavirus-related costs, delays in supplier deliveries, travel restrictions, site access and quarantine restrictions, employee absences, remote work and adjusted work schedules. We took steps to comply with the executive order mandating COVID-19 vaccines across our workforce, with exceptions approved for employees based on medical reasons or religious beliefs, until it was enjoined by a federal court in December 2021. As of December 31, 2021, more than 96% of our U.S. employee population had been vaccinated or received an approved exception. If the executive order is reinstated on appeal, or new mandates implemented, it is uncertain to what extent compliance with any such vaccine mandates may result in adverse impacts such as workforce attrition for us or our suppliers or reduced morale or efficiency. If the adverse impact is significant for us or our suppliers, our operations and ability to execute on our contracts could incur significant timebe adversely affected. The ultimate impact of COVID-19 on our operational and expensefinancial performance in such efforts.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 of the pandemic, potential subsequent waves of COVID-19 infection or potential new variants, the effectiveness and adoption of COVID-19 vaccines and therapeutics, supplier impacts and related government actions to prevent and manage disease spread, including the implementation of any federal, state, local or foreign vaccine mandates, 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 but could negatively affect our future results and performance.

For most of our contracts weWe rely on other companies to provide materials, major components and products, and to perform a portion of the services that we provideare provided to our customers. Suchcustomers under the terms of most of our contracts. These arrangements may involve subcontracts, teaming arrangements, joint ventures or supply agreements with other companies upon which we rely (contracting parties). There is a risk that the contracting party does not perform at all or to our expectations or meet affordability targets and we may have disputes with our contracting parties, including disputes regarding the quality and timeliness of work performed, the workshare provided to that party,workshares, customer concerns about the other party’s performance, our failure to extend existing task ordersissue or issue newextend task orders, or our hiring the personnel of a subcontractor, teammate or joint venture partner or vice versa. In addition, changesWe could also be adversely affected by actions by

Changes in the economic environment, including as a result of the COVID-19 pandemic, geopolitical events, defense budgets, trade sanctions and constraints on available financing, and the highly competitive and budget-constrained environment in which we operate, may adversely affect the financial stability and viability of our contracting parties andor their ability to meet their performance requirements or to provide needed supplies or services on a timely basis as might their inability to perform profitably in the current highly competitivebasis. Some scarce raw materials required for our products are largely controlled by a single country, including rare earth minerals that are largely controlled by China, and budget constrained environment. We could alsotherefore can be adversely affectedimpacted by reputational issues experienced by our teammatespotential trade actions involving that are outsidecountry. Advanced microelectronics, including semiconductors, underpin many of our control,current and future critical technologies and platforms and global shortages of these products due to COVID-19 or other supply chain challenges could result in increased procurement lead times and costs and potential shortages, which could adversely affectimpact our performance. Additionally, our efforts to increase the efficiency of our operations and improve the affordability of our products and services could negatively impact our ability to competeattract and retain suppliers. We must comply with specific procurement requirements that can limit the source of supplies and we do not have secondary suppliers for contract awards. some supplies. Because the identification and qualification of new or additional suppliers can take an extended period of time, issues with suppliers or trade actions that limit our ability to use certain suppliers can have an adverse impact on our business. Complying with U.S. Government contracting regulations that limit the source or manufacture of suppliers and impose stringent cybersecurity regulations also may create challenges for our supply chain and increase costs.

A failure for whatever reason, by one or more of our contracting parties to provide the agreed-upon supplies or perform the agreed-upon services on a timely basis, according to specifications, or at all, may affect our ability to perform our obligations and require that we transition the work to other companies. Contracting party performance deficiencies may result in additional costs or delays in product deliveries and affect our operating results and could result in a customer terminating our contract for default or convenience. A default termination could expose us to liability and affect our ability to compete for future contracts and orders. A failure by our contracting parties to meet affordability targets could negatively affect our profitability, result in contract losses and affect our ability to win new business.

Many of the products and services we provide are highly engineered and involve sophisticated technologies with related complex manufacturing and systems integration processes. Our customers’ requirements change and evolve regularly. Accordingly, our future performance depends, in part, on our ability to adapt to changing customer needs rapidly, identify emerging technological trends, develop and manufacture innovative products and services efficiently and bring those offerings to market quickly at cost-effective prices. This includes efforts to implement emerging digital and network technologies and capabilities. To advance our innovation and position us to meet our customers’ requirements, we make investments in emerging technologies that we believe are needed to keep pace with rapid industry innovation and seek to collaborate with commercial entities that we believe have complementary technologies to ours. These entities may not be accustomed to government contracting and may be unwilling to agree to the government’s customary terms, including those governing intellectual property. In addition, our relationships and contracts with these commercial entities may present different risks and challenges, including with respect to intellectual property, liability and indemnification terms, than what we are accustomed to with our government customers. Due to the complex and often experimental nature of the products and services we offer, we may experience technical difficulties during the development of new products or technologies. These technical difficulties could result in delays and higher costs, which may negatively impact our financial results, and could divert resources from other projects, until such products or technologies are fully developed. See Note 1 – Organization and Significant Accounting Policies included in our Notes to Consolidated Financial Statements for further details about losses incurred on certain development programs. Additionally, there can be no assurance that our development projects will be successful or meet the needs of our customers.

Our competitors may also develop new technology, or offerings, or more efficient ways to produce existing products that could cause our existing offerings to become obsolete or that could gain market acceptance before our own competitive offerings. If we fail in our development projects or if our new products or technologies fail to achieve customer acceptance, we may be unsuccessful in obtaining new contracts or winning all or a portion of next generation programs, and this could adversely affect our future performance and financial results. We also may not be successful in our efforts to increase the efficiencygrow in key areas such as hypersonics, classified programs, and winning next generation franchise programs, which could adversely affect our future performance.

In 2017, 30%2021, 28% of our total net sales were from international customers. This percentage has been increasingcustomers and we have a strategy to continue tothese sales may grow international sales, inclusive of sales of F-35 aircraft to our international partners and other countries.in the future. International sales are subject to numerous political and economic factors, budget uncertainty, regulatory requirements, significant competition, taxation, and other risks associated with doing business in foreign countries. Our exposure to such risks increased as a result of our acquisition of Sikorsky and our increased ownership interest in AWE and may further increase if ouroutside the U.S. In international sales, grow as we anticipate.face substantial competition from both U.S. manufacturers and international manufacturers whose governments sometimes provide research and development assistance, marketing subsidies and other assistance for their products and services.

Our international business is conducted through foreign military sales (FMS) contracted through the U.S. Government orand by direct commercial sales (DCS) withto international customers. In 2017, approximately 63% of our sales to international customers were FMS and about 37% were DCS. These transaction types differ as FMS transactions represent sales by the U.S. Government to international governments and our contractcontracts with the U.S. Government isare subject to FAR. Bythe FAR and the DFARS. In contrast, DCS transactions represent sales by us directly to another international governmentcustomers and are not subject to the FAR or commercialthe DFARS, although they are subject to the procurement regulations of the international customer. All salesSales to international customers are subject to U.S. and foreign laws and regulations, including without limitation, import-export control, technology transfer restrictions, investments, taxation, repatriation of earnings, exchange controls, the Foreign Corrupt Practices Act and other anti-corruption laws and regulations, and the anti-boycott provisions of the U.S. Export Administration Act.Control Reform Act of 2018. While we have stringentextensive policies in place to comply with such laws and regulations, failure by us, our employees or others working on our behalf to comply with these laws and regulations could result in administrative, civil, or criminal liabilities, including suspension, debarment from bidding for or performing government contracts, or suspension of our export privileges, which could have a material adverse effect on us. We frequently team with international subcontractors and suppliers who also are also exposed to similar risks.

While internationalInternational sales whether contracted as FMS or DCS, present risks that are different and potentially greater than those encountered in our U.S. business, DCS with international customers may impose even greater risks.business. We believe DCS transactions present the greatest potential risks because they involve direct commercial relationships with parties with whom we typically have less familiarity and where there may be significant cultural differences.familiarity. Additionally, international procurement and local country rules and regulations, contract laws, and regulations, and contractual termsjudicial systems differ from those in the U.S. and, are less familiar to us. International regulationsin some cases, may be interpreted by foreign courts less bound by precedentdeveloped than in the U.S., which could impair our ability to enforce contracts and increase the risk of adverse or unpredictable outcomes, including the possibility that certain matters that would be considered civil matters in the U.S. are treated as criminal matters in other countries.

In conjunction with more discretion; these interpretations frequently have terms less favorabledefense procurements, some international customers require contractors to us than the FAR. Export and import, tax and currency risk also may be increasedcomply with industrial cooperation regulations, including entering into industrial participation or industrial development agreements, sometimes referred to as offset agreements, as a condition to obtaining orders for DCS with international customers. While these risks are potentially greater than those encountered in our U.S. business, we seek to price our products and services. Industrial participation or development agreements generally extend over several years and obligate the contractor to perform certain commitments, which may include in-country purchases, technology transfers, local manufacturing support, consulting support to in-country projects, investments in joint ventures and financial support projects. The customer’s expectations in respect of the scope of offset commitments can be substantial, including high-value content, and may exceed existing local technical capability. Failure to meet these commitments, which can be subjective and outside of our control, may result in significant penalties, and could lead to a reduction in sales to a country. Furthermore, certain of our existing industrial development agreements are dependent upon the successful operation of joint ventures that we do not control and involve products and services commensurate withthat are outside of our core business, which may increase the risk profilethat we fail to meet our industrial cooperation agreements, expose us to compliance risks of the joint venture and impair our ability to recover our investment. For more information on DCS with international customers.our industrial development obligations, including the notional value of our remaining industrial development obligations and potential penalties for non-compliance, see “Contractual Commitments” in Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).

Our international business is highly sensitive to changes in regulations (including tariffs, sanctions, embargoes, export and import controls and other trade restrictions), political environments or security risks that may affect our ability to conduct business outside of the U.S., including those regarding investment, procurement, taxation and repatriation of earnings.

International sales also may be adversely affected by actions taken by the U.S. Government in the exercise of foreign policy, Congressional oversight or the financing of particular programs, including the prevention or imposition of conditions upon the sale and delivery of our products, the imposition of sanctions, or Congressional action to block sales of our products. For example, the U.S. Government has imposed certain sanctions on Turkish entities and persons as described in the risk factor below, and could act in the future to prevent or restrict sales to other customers. Our international business also may be impacted by changes in foreign national priorities, foreign government budgets, global economic conditions, and fluctuations in foreign currency exchange rates. Sales of military products and any associated industrial cooperation agreements are also affected by defense budgets and U.S. foreign policy.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 orders from our international customers can be less predictable than for our U.S. customers and may lead to fluctuations in the amount reported each year for our international sales.

We have a number of contracts with defense procurements, some international customers require contractors to complyTurkish industry for the Turkish Utility Helicopter Program (TUHP), which anticipates co-production with industrial cooperation regulations, including entering into industrial cooperation agreements, sometimes referred toTurkish industry for production of T70 helicopters for use in Turkey, as offset agreements. Offset agreements may require in-country purchases, technology transfers, local manufacturing support, investments in foreign joint ventureswell as the related provision of Turkish goods and financial support projects as an incentiveservices under buy-back or as a condition to a contract award. In some countries, these offset agreements may require the establishment of a venture with a local company, which must control the venture. The costs to satisfy our offset obligations, to include the future sales of helicopters built in Turkey for sale globally. Although existing export licenses are includednot subject to the current sanctions, we continue to expect pending and future export licensing applications and any required modifications, extensions or changes in scope to the estimatesexisting licenses where SSB or any of certain affiliated persons is a party to the underlying transaction to be denied, which denials would adversely affect our total costsability to completeperform the contractimpacted contracts. For example, since April 2021, we have received multiple denials from the U.S. Department of State for export, import and maymanufacturing licenses pertaining to TUHP. These denials prevent us from performing certain significant obligations under contracts for TUHP, which has and will affect our sales and impact our profitability and cash flows. The ability to recover investmentscertain costs. As a result of these license denials, we have provided force majeure notices under the affected contracts and these contracts may be restructured or terminated, which could result in a further reduction in sales, the imposition of penalties or assessment of damages, and increased unrecoverable costs. In addition, we have other programs where we work with Turkish industry, including for domestic U.S. Black Hawk® helicopter production, that rely on components from Turkish suppliers. While these commercial relationships are not affected by the current sanctions, they could be adversely affected by the imposition of additional sanctions.

Although the existing sanctions adversely affect our participation in TUHP, they are not currently expected to have a material effect on our overall business. The sanctions, however, may result in the loss of future sales opportunities to and in Turkey and are adversely affecting our relationships with Turkish-based suppliers who we make is generally dependent uponhave worked with for many years, and any future sanctions by the successful operationU.S. Government or reciprocal actions by Turkey or Turkish industry could result in further

We own a substantial number of U.S. and foreign patents and trademarks related to the products and services that are dissimilarwe provide. In addition to owning a large portfolio of patents and trademarks, we develop and own other intellectual property, including copyrights, trade secrets and research, development and engineering know-how, which contribute significantly to our business activities. In thesebusiness. We also license intellectual property to and from third parties. The FAR and DFARS provide that the U.S. Government obtains certain rights in intellectual property, including patents, developed by us and our subcontractors and suppliers in performance of government contracts or with government funding. The U.S. Government may use or authorize others, including competitors, to use such intellectual property. Non-U.S. governments may also have certain rights in patents and other situations,intellectual property developed in performance of our contracts with these entities. The U.S. Government is pursuing aggressive positions regarding the types of intellectual property to which government use rights apply and when it is appropriate for the government to insist on broad use rights. The DoD is also implementing an overarching intellectual property acquisition policy that will require a greater focus and planning as to intellectual property rights for its programs, and we have no assurance as to the potential impacts of this policy or any associated regulatory changes on future acquisitions. The DoD’s efforts could be liableaffect our ability to protect and exploit our intellectual property and to leverage supplier intellectual property, for violationsexample, if we are unable to obtain necessary licenses from our suppliers to meet government requirements. Additionally, third parties may assert that our products or services infringe their intellectual property rights, which could result in costly and time-consuming disputes, subject us to damages and injunctions and adversely affect our ability to compete and perform on contracts.

Due to the specialized nature of law for actions taken by these entities such as laws relatedour business, our performance is dependent upon our ability to anti-corruption, importidentify, attract and export, taxation, and anti-boycott restrictions. Offset agreements generally extend over several years and may provide for penalties in the event we fail to perform in accordanceretain a workforce with the offset requirements which are typically subjectiverequisite skills in multiple areas including: engineering, science, manufacturing, information technology, cybersecurity, business development and strategy and management. Our operating performance is also dependent upon personnel who hold security clearances and receive substantial training to work on certain programs or tasks and can be difficult to replace on a timely basis if we experience unplanned attrition. Additionally, as we expand our operations internationally, it is increasingly important to hire and retain personnel with relevant experience in local laws, regulations, customs, traditions and business practices.

To the extent that we lose experienced personnel, it is critical that we develop other employees, hire new qualified personnel, and successfully manage the short and long-term transfer of critical knowledge and skills. Competition for talent is intense, and this may affect our ability to successfully attract or retain personnel with the requisite skills or clearances. We increasingly compete with commercial technology companies outside of the aerospace and defense industry for qualified technical, cyber and scientific positions as the number of qualified domestic engineers is decreasing and the number of cyber professionals is not keeping up with demand. To the extent that these companies grow at a faster rate or face fewer cost and product pricing constraints, they may be able to offer more attractive compensation and other benefits to candidates, including in the recruitment of our control.existing employees. In cases where the demand for skilled personnel exceeds supply, we could experience higher labor, recruiting or training costs in order to attract and retain such employees. We could experience difficulty in performing our contracts and executing on new or growing programs if we have a shortage of skilled employees or if our recruiting is delayed. We also must manage leadership development and succession planning throughout our business. While we have processes in place for management transition and the transfer of knowledge and skills, the loss of key personnel, coupled with an inability to adequately train other personnel, hire new personnel or transfer knowledge and skills, could significantly impact our ability to perform under our contracts and execute on new or growing programs.

WeGiven the nature of our business, we routinely experience various cybersecurity threats, threats to our information technology infrastructure, unauthorized attempts to gain access to our company, sensitiveemployee- and customer-sensitive information, insider threats and denial-of-service attacks as do our customers, suppliers, subcontractors and joint venture partners. We have a Computer Incident Response Team (CIRT) which has among its responsibilities defending against such attacks. Additionally, we conduct regular periodic training of our employees as to the protection of sensitive information which includes training intended to prevent the success of “phishing” attacks. We experience similar security threats at customer sites that we operate and manage.

The threats we face vary from attacks common to most industries, such as ransomware, to more advanced and persistent, highly organized adversaries, including nation states,state actors, which target us and other defense contractors because we protect national security information.contractors. These threats can cause disruptions to our business operations. If we are unable to protect sensitive information, including complying with evolving information security and data protection/privacy regulations, our customers or governmental authorities could question the adequacy of our threat mitigation and detection processes and procedures, andprocedures. Moreover, depending on the severity of thean incident, our customers’ data, our employees’ data, our intellectual property (including trade secrets and research, development and engineering know-how), and other third partythird-party data (such as teammates, venture partners, subcontractors, suppliers and vendors) could be compromised. AsProducts and services we provide to customers also carry cybersecurity risks, including risks that they could be breached or fail to detect, prevent or combat attacks, which could result in losses to our customers and claims against us, and could harm our relationships with our customers.

We have an extensive global security organization whose mission is to protect our systems and data, including a consequenceComputer Incident Response Team (CIRT) to defend against cyber attacks and annual training of theirour employees on protection of sensitive information, including testing intended to prevent the success of “phishing” attacks. Additionally, we partner with our defense industrial base peers, government agencies and cyber associations to share intelligence to further defend against cyber attacks. We also have a corporate-wide counterintelligence and insider threat detection program to proactively identify external and internal threats, and mitigate those threats in a timely manner. However, because of the persistence, sophistication and volume of cyber attacks, we may not be successful in defending against all such attacks. Dueattacks and due to the evolving nature of these security threats and the national security aspects of much of the data we protect, the impact of any future incident cannot be predicted.

In addition to cyber threats, we experience threats to the security of our facilities and employees and threats from terrorist acts as doWe also typically work cooperatively with our customers, suppliers, subcontractors, joint venture partners and entities we acquire, with whom we typically work cooperativelywho are subject to similar threats, to seek to minimize the impact of cyber threats, other security threats or business disruptions. However, we must rely on the safeguards put in place by these entities, as well as otherThese entities, which we do notare typically outside our control whoand may have access to our information, and may affect the security of our information. These entities have varying levels of cybersecurity expertise and safeguards, and their relationships with government contractors, such as Lockheed Martin,including us, may increase the likelihood that they are targeted by the same cyber threats we face. We have approximately 16,000thousands of direct suppliers and even more indirect suppliers with a wide variety of systems and cyber securitycybersecurity capabilities and we may not be successful in preventing adversaries from exploiting possible weak linksactively seek to exploit security and cybersecurity weaknesses in our supply chain. A breach in our multi-tiered supply chain could impact our data or customer deliverables. We also must rely on this supply chain for detecting and reporting cyber incidents, and so we may not be successful in reportingwhich could affect our ability to report or respondingrespond to cyber securitycybersecurity incidents effectively or in a timely manner. Because of the ongoing supply chain cyber security related threats, our customers continue to seek that large prime contractors, like Lockheed Martin, take steps to assure the cyber capabilities of their supply chain. Consequently, cyber security events in our supply chain could have an adverse impact on our relationships with our customers.

The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Additionally, some cyber technologies we develop under contract for our customers, particularly those related to homeland security, may raise potential liabilities related to intellectual property and civil liberties, including privacy concerns, which may not be fully insured or indemnified by other means or involve reputational risk. Our enterprise risk management program includes threat detection and cyber securitycybersecurity mitigation plans, and our disclosure controls and procedures address cyber securitycybersecurity and include elements intended to ensure that there is an analysis of potential disclosure obligations arising from security breaches. We also maintain compliance programs to address the potential applicability of restrictions againston trading while in possession of material, nonpublic information generally and in connection with a cyber securitycybersecurity breach. However, we may not be successful in detecting, reporting or responding

In addition to cyber incidents in a timely manner.threats, we face threats to the security of our facilities and employees and threats from terrorist acts, which could materially disrupt our business if carried out.

In pursuing our business strategy, we routinely conduct discussions, evaluate companies, and enter into agreements regarding possible acquisitions, divestitures,joint ventures, other investments and equity investments.divestitures. We seek to identify acquisition or investment opportunities that will expand or complement our existing products and services or customer base, at attractivereasonable valuations. We often compete with othersother companies for the same opportunities. To be successful, we must conduct due diligence to identify valuation issues and potential

Ventures,On December 20, 2020, we entered into an agreement to acquire Aerojet Rocketdyne Holdings, Inc. (Aerojet Rocketdyne). Closing of the transaction is subject, among other things, to expiration of any waiting period under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended (which now has expired), and any other period in which the parties have agreed not to close. On January 11, 2022, the parties provided an updated notice of their intended closing date under their timing agreement with the Federal Trade Commission (FTC), whereby the parties agreed that they would not close the transaction before January 27, 2022, to enable the parties to discuss the scope and nature of the merchant supply and firewall commitments previously offered to the FTC by Lockheed Martin. We have been advised by the FTC that its concerns regarding the transaction cannot be addressed adequately by the terms of a consent order. We believe it is highly likely that the FTC will vote to sue to block the transaction and expect they will make a decision before January 27, 2022. If the FTC sues to block the transaction, we could elect to defend the lawsuit within 30 days or terminate the merger agreement. If the FTC does not file a lawsuit to block the transaction before January 27, 2022, the parties could proceed to close the transaction, but there is no assurance that the FTC would not file a lawsuit challenging the transaction after the closing since the parties have not reached agreement on the terms of a consent order. A post-closing lawsuit could include taking action to seek a declaration that the acquisition is unlawful and to seek divestiture of all or part of the Aerojet Rocketdyne business or to enjoin integration of the Aerojet Rocketdyne business with Lockheed Martin’s business. There is no assurance that we would be successful in any litigation with the FTC, whether before or after closing.

Joint ventures and other noncontrolling equity investments operate under shared control with other parties. These investments typically face many of the same risks and uncertainties as we do, but may expose us to additional risks not present if we retained full control. A joint venture partner may have economic or other business interests that are inconsistent with ours and we may be unable to prevent strategic decisions that may adversely affect our business, financial condition and results of

Depending on our rights and percentage of ownership, we may consolidate the financial results of such entities or account for our interests under the equity method. Under the equity method of accounting for nonconsolidated ventures and investments, we recognize our share of the operating profit or loss of these joint ventures in our results of operations. Our operating results may beare affected by the conduct and performance of businesses over which we do not exercise control which includes the inability to influence strategic decisions that may adversely affect our business, financial condition and, results of operations. Asas a result, we may not be successful in achieving the growth or other intended benefits of strategic investments. Our joint ventures face many of the same risks and uncertainties as we do. The most significant impact of our equity investments is inhad the greatest impact on our Space business segment where approximately 21%6% of its 20172021 operating profit was derived from its share of earnings from equity method investees, particularlyprimarily that in United Launch Alliance (ULA).

ThereThrough our Lockheed Martin Ventures Fund, we make investments in early-stage companies that we believe are advancing or developing new technologies applicable to our core businesses and new initiatives important to Lockheed Martin. These investments may be in the forms of common or preferred stock, warrants, convertible debt securities or investments in funds and are generally illiquid at the time of investment, which limits our ability to exit an investment or realize an investment absent a liquidity event. Typically, we hold a non-controlling interest and, therefore, are unable to influence strategic decisions by these companies and may have limited visibility into their activities, which may result in our not realizing the intended benefits of the investments. For fund investments, we have even less influence and visibility as a non-controlling investor in a fund that invests in other companies. We may recognize significant gains or losses attributable to adjustments of the investments’ fair value, including impairments up to and including the full value of the investment, which can be no assuranceaffected by the success of the companies, market volatility and changes in valuations of our investment holdings.

The accounting for some of our most significant activities is based on judgments and estimates, which are complex and subject to many variables. For example, accounting for sales using the percentage-of-completion method requires that we will continueassess risks and make assumptions regarding future schedule, cost, technical and performance issues for thousands of contracts, many of which are long-term in nature. Additionally, we initially allocate the purchase price of acquired businesses based on a preliminary assessment of the fair value of identifiable assets acquired and liabilities assumed. For significant acquisitions we may use a one-year measurement period to increaseanalyze and assess a number of factors used in establishing the asset and liability fair values as of the acquisition date which could result in adjustments to asset and liability balances.

We have $10.8 billion of goodwill assets recorded on our dividend or to repurchase sharesconsolidated balance sheet as of December 31, 2021 from previous acquisitions, which represents approximately 21% of our common stock at current levels.

Changes in U.S. (federal or state) or foreign tax laws and is determined after considering current conditions,regulations, or their interpretation and application, including earnings, other operating results and capital requirements. Our payment of dividends and share repurchasesthose with retroactive effect, could vary from historical practices or our stated expectations. Decreasesresult in asset values or increases in liabilities, including liabilities associated with benefit plansour tax expense and assetsaffect profitability and liabilities associated with taxes, can reduce net earnings and stockholders’ equity. We recorded a net one-time tax charge, substantially all of which was non-cash, resulting from the estimated impact ofcash flows. For example, beginning in 2022, the Tax Cuts and Jobs Act which reduced ourof 2017 net earningseliminates the option to deduct research and resulted in a deficit in our total equity as of December 31, 2017. As a Maryland corporation, so long as we are able to pay our indebtedness as it becomes duedevelopment expenditures immediately in the usual course of business, we anticipate that we would be ableyear incurred and requires taxpayers to pay dividends and make stock repurchasesamortize such expenditures over five years. If these provisions are not deferred, modified, or repealed by Congress with retroactive effect to January 1, 2022, they will materially decrease our cash from operations beginning in 2022. We currently estimate an amount limitedapproximately $500 million impact to our net earnings2022 cash from operations based on the provisions currently in either the current or the preceding fiscal year oreffect. The actual impact on 2022 cash from the net earnings for the preceding eight quarters, notwithstanding the deficit in our total equity. However, our ability to pay dividends and make share repurchases under Maryland law could be limited if our net earnings are less than anticipated. We also have no assurance as to the timing of any increase in our stockholders’ equity. In addition, the timing and amount of share repurchases under board approved share repurchase plans is within the discretion of management andoperations will depend on manyif and when these provisions are deferred, modified, or repealed by Congress, including if retroactively, and the amount of research and development expenses paid or incurred in 2022 among other factors. In addition, 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 likely be materially increased in subsequent years. See "Consolidated Results of Operations - Income Tax Expense" in the MD&A for additional detail on the potential effect of tax rate increases. In addition to future changes in tax laws, the amount of net deferred tax assets will change periodically based on several factors, including resultsthe measurement of operations, capital requirements as well as applicable law.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. 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.

A significant portion of our business relates to designing, developing and manufacturing advanced defense and technology products and systems. New technologies may be untested or unproven. Failure of some of these products and services could result in extensive loss of life or property damage. Accordingly, we also may incur liabilities that are unique to our products and services, including combat and air mobility aircraft, missile and space systems, command and control systems, cybersecurity, homeland security and training programs.services. In some but not all circumstances, we may be entitled to certain legal protections or indemnifications from our customers, either through U.S. Government indemnifications under Public Law 85-804, 10 U.S.C. 2354, the Commercial Space Launch Act or the Price-Anderson Act, qualification of our products and services by the Department of Homeland Security under the SAFETY Act provisions of the Homeland Security Act of 2002, contractual provisions or otherwise. We endeavorseek to obtain insurance coverage from established and reputable insurance carriers to cover these risks and liabilities. The amount of insurance coverage that we maintain may not be adequate to cover all claims or liabilities. Insurance coverage is subject to the terms and conditions of the insurance contract and is further subject to any sublimits, exclusions, restrictions, or defenses. Existing coverage is renewed annually and may be canceled while we remain exposed to the risk and it is not possible to obtain insurance to protect against all operational risks, natural hazards and liabilities. For example, we are limited in the amount of insurance we can obtain to cover unusually hazardous risks or certain natural hazards such as earthquakes.earthquakes, fires or extreme

Substantial costs resulting from an accident; failure of or defect in our products or services; natural catastrophe or other incident; or liability arising from our products and services in excess of any legal protection, indemnity, and our insurance coverage (or for which indemnity or insurance is not available or not obtained) could adversely impact our financial condition, cash flows, orand operating results. Any accident, failure of, or defect in our products or services, even if fully indemnified or insured, could

We manage and have managed various U.S. Government-owned facilities, and portions of U.S. Government-owned facilities on behalf of the U.S. Government. At such facilities, environmental compliance and remediation costs historically have been the responsibility of the U.S. Government. We have relied, and continue to rely with respect to past practices, uponon U.S. Government funding to pay such costs, notwithstanding efforts by some U.S. Government representatives to limit this responsibility. Although the U.S. Government remains responsible for capital and operating costs associated with environmental compliance, responsibility for fines and penalties associated with environmental noncompliance typically is borne by either the U.S. Government or the contractor, depending on the contract and the relevant facts. Some environmental laws include criminal provisions. AnA conviction under environmental law conviction could affect our ability to be awarded future or perform under existing U.S. Government contracts.

We have incurredThe increasing global regulatory focus on greenhouse gas ("GHG") emissions and will continuetheir potential impacts relating to incur liabilities under various federal, state, localclimate change could result in laws, regulations or policies that significantly increase our direct and foreign statutes for environmental protectionindirect operational and remediation. The extent ofcompliance burdens, which could adversely affect our financial exposure cannotcondition and results of operations. These laws, regulations or policies could take many forms, including carbon taxes, cap and trade regimes, increased efficiency standards, GHG reduction commitments, incentives or mandates for particular types of energy or changes in all casesprocurement laws. Changes in government procurement laws that mandate or take into account climate change considerations, such as the contractor’s GHG emissions, lower emission products or other climate risks, in evaluating bids could result in costly changes to our operations or affect our competitiveness on future bids. In addition to incurring direct costs to implement any climate-change related laws, regulations or policies, we may see indirect costs rise, such as increased energy or material costs, as a result of policies affecting other

Our business may be adversely affected by the outcome of legal proceedings and other contingencies that cannot be predicted with certainty. As required by U.S. GAAP, we estimate loss contingencies and establish reserves based on our assessment of contingencies where liability is deemed probable and reasonably estimable in light of the facts and circumstances known to us at a particular point in time. Subsequent developments in legal proceedings may affect our assessment and estimates of the loss contingency recorded as a liability or as a reserve against assets in our financial statements. For a description of our current legal proceedings, see Item 3 - Legal Proceedings along with “Note 3 – Acquisitions and Divestitures” and “Note 1415 – Legal Proceedings, Commitments and Contingencies” included in our Notes to Consolidated Financial Statements.