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. Our main areas of focus are in defense, space, intelligence, homeland security and information technology, including cybersecurity. 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 2020, 74% of our $65.4 billion in net sales were from the U.S. Government, either as a prime contractor or as a subcontractor (including 64% from the Department of Defense (DoD)), 25% 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 complexity ina complex and evolving global security environment. Our strategy consists of the design and continuing economic pressuresdevelopment of platforms and systems that meet the future requirements of 21st Century Security. Our vision for 21st Century Security is to accelerate the adoption of advanced networking and leading-edge technologies into our national defense enterprise, while enhancing the performance and value of our platforms and products for our customers. The aim of 21st Century Security is to integrate new and existing systems across all domains with advanced, open-architecture networking and operational technologies to make forces more agile, adaptive and unpredictable.

21st Century Security is an overarching vision that will guide our investment and strategy and we are also focused on four elements for potential growth in the U.S.near to mid-term: current programs of record, classified programs, hypersonics and globally. Anew awards. We have multiple programs of record from each business segment that are entering growth stages, including the F-35 sustainment activity (Aeronautics), increased PAC-3 production rates (Missiles and Fire Control), CH-53K heavy lift helicopter (Rotary and Mission Systems), and the modernization and enhancements to the Trident II D5 Fleet Ballistic Missile (Space). We are engaged in significant componentclassified development programs and pending successful achievement of the objectives within those programs, we expect to begin the transition from development to production over the next few years. We are currently performing on multiple hypersonic programs and following the successful completion of ongoing testing and evaluation activity, multiple programs are expected to enter early production phases between 2023 and 2026. Finally, we are always in pursuit of new program awards to develop future platforms that enable us to continue to place security capability into the market and expand our global reach.

Key to enabling success of our strategy in this environment is developing differentiating technologies, forging strategic partnerships, including with commercial companies, executing on our multi-year business transformation initiative to focus on program execution, improving the qualityenhance our digital infrastructure and predictability of the delivery ofincrease efficiencies and collaboration throughout our productsbusiness and services,maintaining fiscal discipline. Underpinning our ability to execute our strategy is our talent 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 are 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.culture. We continue to focus on affordability initiatives. We also expect to continue to innovate and invest in technologies to fulfill new mission requirements for our customers, including through acquisitions, and investsubstantially in our people soto ensure that we haveour workforce has the technical skills necessary to succeed.succeed, and we expect to continue to invest internally in innovative technologies that address rapidly evolving mission requirements for our customers. We also will continue to evaluate our portfolio and will make strategic acquisitions or divestitures, 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. We organize our business segments based on the nature of the products and services offered.

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 various classified programs. Aeronautics’ major programs include:

The F-35 program is our largest program, generating 28%27% of our total consolidated net sales, as well as 69%66% of Aeronautics’ net sales in 2020.2022. The F-35 program consists of multiple development, production and sustainment contracts. Development is focused on modernization of F-35’s capability and addressing emerging threats. Sustainment provides logistics and training support for the aircraft delivered to F-35 customers.

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 unmanned ground vehicles; and energy management solutions. MFC also has contracts with the U.S. Government for various classified programs. MFC’s major programs include:

RMS designs, manufactures, services and supports various military and commercial helicopters, surface ships, sea and land-based missile defense systems, radar systems, sea and air-based mission and combat systems, command and control mission solutions, cyber solutions, and simulation and training solutions. RMS also has contracts with the U.S. Government for various classified programs. RMS’ major programs include:

Space is engaged in the research and design, development, engineering and production of satellites, space transportation systems, and strategic, advanced strike, and defensive 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, weWe also develop and own other intellectual property, including copyrights, trade secrets and research, development and engineering know-how, which contributethat contributes significantly to our business. We alsoIn addition, we license intellectual property to and from third parties. The Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (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. See the discussion of matters related to our intellectual property withinin Item 1A - Risk Factors. Non-U.S. governments also may also have certain rights in patents and other intellectual property developed in performance of 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.

No material portion of our business is considered to be seasonal. Various factors, however, 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 sales.sales that are not foreign military sales (FMS) contracted through the U.S. Government. 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 in limited cases certain other governments may terminate any of our government contracts and subcontracts either at itstheir 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 valueour recovery or recoverrecoup 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 often 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 obligates 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

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

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 substantially 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 1514 – Legal Proceedings, Commitments and Contingencies” included in our Notes to Consolidated Financial Statements. See also the discussion of environmental matters withinin Item 1A - Risk Factors.

ResearchThere is an increasing global regulatory focus on greenhouse gas (GHG) emissions and Development

We make our website content available for information purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Annual Report on Form 10-K (Form 10-K).

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

Statements and assumptions with respect to future sales, income and cash flows, growth, program performance, the outcome of litigation, anticipated pension cost and funding, environmental remediation cost estimates, planned acquisitions or dispositions of assets, or the anticipated consequences are examples of forward-looking statements. Numerous factors, including the risk factors described in the following section, could cause our actual results to differ materially from those expressed in our forward-looking statements.

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 purchasetrade in our common stock or debt securities.

We believe our diverse range of products and services generally make it less likely that cuts in any specific contract or program will affect our business on a long-term basis. However, termination of significant programs or contracts could adversely affect our business and future financial performance. DoD’s changes in funding priorities also could reduce opportunities in existing programs and in future programs or initiatives where we intend to compete and where we have made investments. While we would expect to compete and be well positioned as the incumbent on existing programs we may not be successful and, even if we are successful, the replacement programs may be funded at lower levels or result in lower margins. In addition, our ability to grow in key areas such as hypersonics programs, classified programs and next-generation franchise programs also will be affected by the overall budget environment and whether development programs transition to production and the timing of such transition, all of which are dependent on U.S. Government authorization and funding.

The F-35 program, which consists of multiple development, production and sustainment contracts, is our largest program. Itprogram and represented 28%27% of our total consolidated net sales in 2020.2022. A decision by the U.S. Government or other governmentsinternational partner and FMS customer countries 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 and delivery 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, supplierour and partnerour suppliers’ performance (including COVID-19 relatedperformance-related challenges), software development, the availabilitydefinitizing and receipt ofreceiving funding for contracts on a timely basis, execution of future flight tests and findings resulting from testing and operating the aircraft, the level of cost associated with life-cyclelife cycle operations and sustainment, inflation-related cost pressures and warranties, continuingthe ability to reducecontinue to improve affordability. Our planned production rates and deliveries have been adversely affected and could continue to be adversely affected by COVID-19 or supplier performance challenges, which affect our results of operations. For example, during 2022, we experienced a temporary halt of F-35 deliveries due to non-compliant materials in a component provided by a supplier, which affected timing of deliveries. Additionally, as described in the unit production costs,“Status of the F-35 Program” in Management Discussion and achieving cost targets.

We believe our diverse range of products and services generally make it less likely that cuts in any specific contract or program will affect our business on a long-term basis. However, termination of multiple or large programs or contracts could adversely affect our business and future financial performance. Changes in funding priorities may afford new or additional opportunities for our businesses in terms of existing, follow-on or replacement programs, but could also reduce opportunities in existing programs and in planned programs where we intend to compete. While we would expect to compete and be well positioned as the incumbent on existing programs, we may not be successful or, even if successful,in making hardware upgrades and other modernization capabilities in a timely manner, including as a result of dependencies on suppliers, which could increase costs and create schedule delays. Our ability to capture and retain future F-35 growth in development, production and sustainment is dependent on the replacement programs may be funded at lower levels.success of our efforts to achieve F-35 sustainment performance, customer affordability, supply chain improvements, continued reliability improvements and other efficiencies, some of which are outside our control.

We and others with which we do business 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 these 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 adversely affect our competitiveness.

In some instances, theseGovernment contract laws and regulations can impose terms or obligations that are different than those typically found in commercial transactions. For example,One of the significant differences is that the U.S. Government may terminate any of our government contracts, and subcontracts not only for default based on our performance, but also at its convenience. Upon terminationGenerally, prime contractors have a similar right under subcontracts related to government contracts. If a contract is terminated for convenience, of a fixed-price type contract,we typically we arewould be entitled to receive the purchase pricepayments for delivered items, reimbursement forour allowable costs incurred and the proportionate share of fees or earnings for work-in-process and an allowance for profit on the contract or adjustment for loss if completion of performance would have resulted in a loss.

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. Failure to perform to customer expectations and contract requirements may result in reduced fees or losses and may adversely affect our financial performance. Our backlog includes a variety of contract types and represents the sales we expect to recognize for our products and services in the future.

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. Typically,Cost, schedule or technical performance issues with respect to cost-reimbursable contracts could result in reduced fees, lower profit rates, or program cancellation.

Fixed-price contracts are predominantly either firm fixed-price (FFP) contracts or fixed-price incentive (FPI) contracts. Under FFP contracts, we enter into three typesreceive a fixed price irrespective of cost-reimbursable contracts: cost-plus-award-fee, cost-plus-incentive-fee,the actual costs we incur and cost-plus-fixed-fee. Cost-plus-award-feewe therefore carry the burden of any cost overruns. Under FPI contracts, providewe generally share with the U.S. Government savings for an award fee that varies within specified limits based oncost underruns less than target costs and expenses for cost overruns exceeding target costs up to a negotiated ceiling price. We carry the customer’s assessmententire burden of cost overruns exceeding the ceiling price amount under FPI contracts. Due to the fixed-price nature of the contracts, if our performance againstactual costs exceed our estimates, our margins and profits are reduced and we could incur a predetermined set of criteria, such as targets based on cost, quality, technical and schedule criteria. Cost-plus-incentive-fee contracts provide for reimbursement of costs plus a fee thatreach-forward loss. A reach-forward loss is adjusted by a formula based on the relationshipwhen estimates of total allowable costs to be incurred on a contract exceed total target costs (i.e., incentive based on cost) or reimbursementestimates of costs plus an incentive to exceed stated performance targets (i.e., incentive based on performance). The fixed-fee inthe transaction price. When this occurs, a cost-plus-fixed-fee contractprovision for the entire loss is negotiateddetermined at the inception ofcontract level and is recorded in the contract and that fixed-fee does not vary with actual costs.period in which the loss is evident.

Contracts for development programs withinclude complex design and technical challengesrequirements and are often cost-reimbursable.contracted on a cost-reimbursable basis, however, some of our existing development programs are contracted on a fixed-price basis or include cost-type contracting for the development phase with fixed-price production options. We expect we also will bid on similar

We also have contracts for the transition from development to production (e.g., LRIPlow rate initial production (LRIP) contracts), which includeswhere the challenge of starting and stabilizing a manufacturing production and test line while the final design is being validated and managing change in requirements or capabilities. Thesecapabilities create performance and financial risks to our business.

Many of our U.S. Government contracts frequently are cost-reimbursableinclude multiple option years and our expected sales or fixed-price incentive-fee contracts. Generally,profits may be adversely affected if the U.S. Government decides not to exercise the options. On the other hand, the U.S. Government may decide to exercise options for contracts under which it is expected that our costs may exceed the contract targetprice or ceiling, which could result in losses or unreimbursed costs.

We are the prime contractor on most of our contracts and rely on other companies to provide materials, major components and products, and to perform a portion of the services that are provided to our customers under the terms of most of our contracts. 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 and, in many cases, our contracting party does not perform at all or to our expectations or meet affordability targets and we mayparties in turn rely on lower-tier subcontractors. We occasionally 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, issues related to lower-tier subcontractor 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. We also could also be adversely affected by actions by or issues experienced by our contracting parties that are outside of our control, such as misconduct and reputational issues involving our contracting parties, which could subject us to liability or adversely affect our ability to compete for contract awards.

Many of the products and services we provide are highly engineered and involve sophisticated technologies with related complex manufacturing and systemsystems 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 provide mission solutions that integrate capabilities and resources across all forces and domains, which we refer to as joint all domain operations, and to implement emerging digital and network technologies and capabilities. To advance our innovation and position us to meet our customers’ requirements, we maymake investments in emerging technologies that we believe are needed to keep pace with rapid industry innovation and seek to collaborate with commercial entities that arewe believe have complementary technologies to ours. These commercial entities may not be accustomed to government contracting and these entities may be unwilling to agree to the government’s customary terms, including those governingwith respect to intellectual property.property, liability and indemnification terms. Due to the complex and often experimental nature of the products and services we offer, we may experience (and have experienced in the past) 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 “NoteNote 1 – Organization and Significant Accounting Policies”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 future success in delivering innovative and affordable solutions to our customers relies, in part, on our multi-year business transformation initiative that seeks to significantly enhance our digital infrastructure to increase efficiencies and collaboration throughout our business while reducing costs. This digital transformation effort requires substantial investment and if we are unable to successfully implement the strategy, our results of operations and future competitiveness may be adversely affected.

Our competitors may also develop new technology,technologies, 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 or competitors develop more capable technologies or offerings, we may be unsuccessful in procuringobtaining 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 grow in key areas such as hypersonics, classified programs, and mission systems,winning next generation franchise programs, which could adversely affect our future performance.

Our international business is conducted through foreign military sales (FMS) contracted through the U.S. Government to international customers through which the U.S. Government purchases products or services from us on behalf of the foreign customer and by direct commercial sales (DCS) to suchinternational customers. In 2020, approximately 67% of our sales to international customers were FMS and about 33% were DCS. FMS contracts with the U.S. Government are subject to the FAR and the DFARS. Because the U.S. Government functions as an intermediary in FMS sales, we are reliant on the capacity and speed of the DoD’s administration of requests from non-U.S. countries to convert requests to sales. In contrast, DCS transactions represent sales by us directly to international customers and are not subject to the FAR or the DFARS.

International sales present risks that are different and potentially greater than those encountered in our U.S. business; and weWe believe DCS presents the greatesttransactions present a higher level of potential risks. DCS transactionsrisks because they involve direct commercial relationships with parties with whomwhich 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 judicial systems differ from those in the U.S. and, in some cases, may be less developedpredictable than those in the U.S., which could impair our ability to enforce contracts and increase the risk of adverse or

In conjunction with defense procurements, some international customers require contractors to comply with industrial cooperation regulations, including entering into industrial participation, or industrial development or localization agreements, sometimes referred to as offset agreements or contracts, as a condition to obtaining orders for our products and services. Industrial developmentThese offset agreements or contracts 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. Expectations asprojects, and to prefer local suppliers or subcontractors. 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 that are outside of our core business, which may increase the risk that we fail to meet our

Our international business is highly sensitive to geopolitical issues and 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.

During 2020, and again on October 26, 2020, the People’s Republic of China (China) announced it may impose sanctions against Lockheed Martinus in response to Congressional Notifications of potential Foreign Military Sales to Taiwan. Foreign Military Sales are government-to-government transactions, and we work closely with the U.S. Government on any militaryTaiwan, which included sales to international customers.of our products. We will continue to follow official U.S. Government guidance as it relates to sales to Taiwan and do not see a material impact on our sales at this time. China has not specified the nature of any such sanctions, but could seek to restrict our commercial sales or supply chain, including ourthe supply of rare earth or other raw materials, and also could also impose sanctions on our suppliers, teammates or partners. The nature, timing and potential impact of any sanctions that may be imposed by China or any other related actions that may be taken are uncertain.

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 TurkishTürkish entities and persons, as describedwhich has affected our ability to perform under contracts supporting the Türkish Utility Helicopter Program (TUHP), our work with Türkish industry and our opportunity for sales in the risk factor below,Türkiye generally. See Management’s Discussion and could act in the future to prevent or restrict sales to other customers, includingAnalysis of Financial Condition and Results of Operations for more information on TUHP. In addition, U.S. Government representatives have raised concerns regarding relationships with the Kingdom of Saudi Arabia, where we have existing business and the United Arab Emirates. U.S. Government officials have indicatedrelationships that the Biden administration is temporarily pausing the implementation of some pending U.S. defense transfers and sales to various countries to allow incoming leadership an opportunity to review. The officials also state that the review is typical with any new administration, but the duration and results of the review are unknown, and if current sales are delayed or canceled or future sales prohibited or restricted, our results from operations, backlog and future performance could be adversely affected.jeopardized if sanctions were imposed. 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, 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.

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 copyrights, trade secrets and research, development and engineering know-how, which contribute significantly to our business. We also license intellectual property to and from third parties. The FAR and DFARS provide that the U.S. governmentGovernment 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. governmentGovernment may use or authorize others, including competitors, to use such intellectual property. Non-U.S. governments also may also have certain rights in patents and other intellectual property developed in performance of our contracts with these entities. The U.S. governmentGovernment 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 affect our ability to protect and exploit our intellectual property and to leverage supplier intellectual property, for example, if we are unable to obtain necessary licenses from our suppliers to meet government requirements. Additionally, while we take measures to protect and enforcethird parties may assert that our products or services infringe their intellectual property rights, and to respect the intellectual property rights of others, our intellectual property and intellectual property licensed or obtained from third parties is subject to challenges (such as infringement and misappropriation claims) by third parties, 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 our business, ourOur performance is dependent upon our ability to identify, attractus identifying, attracting, developing, motivating and retainretaining a highly skilled workforce with the requisite skills in multiple areas including: engineering, science, manufacturing, information technology, cybersecurity, business development and strategy and management. Our operatingDue to the national security nature of our work, our performance is also dependent upon personnel who hold security clearances and receive substantial training in order to work on certain programs or tasks. Additionally,tasks and can be difficult to replace on a timely basis if we experience unplanned attrition. The market for highly skilled workers and leaders in our industry as we expandwell as the market for individuals holding high-level security clearances is extremely competitive and not confined to our operations internationally, it is increasingly important to hire and retain personnel with relevant experience in local laws, regulations, customs, traditions and business practices.

Workforce dynamics are constantly evolving. If we do not manage changing workforce dynamics effectively, it could adversely affect our culture, reputation and operational flexibility. Beginning with the COVID-19 pandemic, a significant portion of our workforce began working remotely and we expect a significant portion to continue working remotely greater than 50% of the time under our hybrid workforce model. If we are unable to effectively adapt to this hybrid work environment long term, then we may experience difficulty in performing our contractsa less cohesive workforce, increased attrition, reduced program performance and executing onless innovation.

It is also critical that we develop and train employees, hire new or growing programs if we have a shortagequalified personnel, and successfully manage the short and long-term transfer of skilled employees or if our recruiting is delayed. We also must managecritical knowledge and skills, including 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.

Approximately 20%Additionally, approximately 19% of our workforce is comprised of employees that are covered by collective bargaining agreements with various unions. If we encounter difficulties with renegotiations or renewals of collective bargaining arrangements or are unsuccessful in those efforts, we could incur additional costs and experience work stoppages. Union actions at suppliers also can also affect us. Any delays or work stoppages could adversely affect our ability to perform under our contracts, which could negatively impact our results of operations, cash flows, and financial condition.

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, employee- and customer-sensitive information, insider threats and denial-of-service attacks as doattacks. Our customers, including sites that we operate and manage for our customers, suppliers, subcontractors and joint venture partners. Wepartners, experience similar security threats.

In addition to cyber threats, at customer sites that we operateface threats to the security of our facilities and manage.employees and threats from terrorist acts, which could materially disrupt our business if carried out. We could also be impacted by the improper conduct of our employees or others working on behalf of us who have access to export controlled or classified information, which could adversely affect our business and reputation.

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. These nation state actors, which target us and other defense contractors for several reasons, including because we protect national security information and develop advanced technology systems.other companies in industries that are part of U.S. critical infrastructure. 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. Moreover, depending on the severity of an incident, our customers’ data, our employees’ data, our intellectual property (including trade secrets and research, development and engineering know-how), and other third-party data (such as teammates, joint venture partners, subcontractors, suppliers and vendors) could be compromised. Products 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.customers and financial results.

We also typically work cooperatively with our customers, suppliers, subcontractors, joint venture partners and entities we acquire, whomwho or which 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 theseThese entities, which are typically outside our control and other entities, none of which we control, whomay have access to our information, and thus may affect the security of our information or the information we are obligated to protect. These entities have varying levels of cybersecurity expertise and safeguards, and their relationships with government contractors, including us, may increase the likelihood that they are targeted by the same cyber threats we face. We have thousands of direct suppliers and even more indirect suppliers with a wide variety of systems and cybersecurity capabilities and adversaries actively 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, which could affect our ability to report or respond to cybersecurity 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 us, 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 cybersecurity mitigation plans, and our disclosure controls and procedures address cybersecurity 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 on trading while in possession of material, nonpublic information generally and in connection with a cybersecurity breach.

In pursuing our business strategy, we routinely conduct discussions, evaluate companies, and enter into agreements regarding possible acquisitions, joint ventures, other investments and 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 other companies for the same opportunities. To be successful, we must conduct due diligence to identify valuation issues and potential loss contingencies;contingencies or underlying risks, some of which are difficult to discover or assess prior to consummation of an acquisition or investment; negotiate transaction terms; complete and close complex transactions;

Acquisition, divestiture, joint venture and investment transactions often require substantial management resources and have the potential to divert our attention from our existing business. Unidentified or identified but un-indemnified pre-closinguncertain liabilities that are not covered by indemnification or other coverage could adversely affect our future financial results,results. This is particularly throughthe case in respect of successor liability under procurement laws and regulations such as the False Claims Act or the Truthful Cost or Pricing Data Act (formerly the Truth in Negotiations Act,Act), anti-corruption, environmental, tax, import-export and technology transfer laws, which provide for civil and criminal penalties and the potential for debarment. We also may incur unanticipated costs or expenses, including post-closing asset impairment charges, expenses associated with eliminating duplicate facilities, employee retention, transaction-related or other litigation, and other liabilities. Any of the foregoing could adversely affect our business and results of operations.

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 are affected by the conduct and performance of businesses over which we do not exercise control and, as a result, we may not be successful in achieving the growth or other intended benefits of strategic investments. Of our business segments, our equity investments had the greatest impact on our Space business segment where approximately 12% of its 2020 operating profit was derived from its share of earnings from equity method investees, primarily that in United Launch Alliance (ULA). We also have our 51% ownership interest in AWE Management Limited (AWE), which operates the United Kingdom’s nuclear deterrent program. This venture generated sales of about $1.4 billion and net earnings of about $29 million in 2020. On November 2, 2020, the UK Ministry of Defense announced its intention to re-nationalize the program on June 30, 2021, which is expected to result in the loss of future sales and operating profit attributable to AWE.

Through our Lockheed Martin Ventures Fund, weWe make investments in certain companies (both within the U.S. and in other countries) that we believe are advancing or developing disruptivenew technologies applicable to our core businesses and new initiatives important to Lockheed Martin.us. These investments may be in the forms of common or preferred stock, warrants, convertible debt securities or investments in funds.funds and are generally illiquid at the time of investment, which limits our ability to exit an investment or realize an investment return absent a liquidity event. We generally seek to exit these investments following a liquidity event, such as a public offering and expiration of any applicable lock up or other restrictions, subject to market conditions, although we may not be successful in exiting in a timely manner. 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. WeFor fund investments, we have also begun investing in funds that invest in other companies. We haveeven less influence and visibility as a non-controlling investor in a fund.

Many of our employees and retirees participate in defined benefit pension plans, retiree medical and life insurance plans, and other postemployment plans (collectively, postretirement benefit plans). The impact of these plans on our earnings may be volatile in that the amount of expense or income we record for our postretirement benefit plans may materially change from year to year because the calculations are sensitive to changes in several key economic assumptions including interest rates and rates of return on plan assets, other actuarial assumptions including participant longevity (also known as mortality) and employee turnover,, as well as the timing of cash funding. Changes in these factors, including actual returns on plan assets, may also affect our plan funding, cash flowflows and stockholders’ equity. In addition, the funding ofWe could be required to make pension contributions earlier and/or in excess than planned if our plans and recovery of costsreturn on pension assets is less than our contracts, as described below, may also be subject to changes caused by legislative or regulatory actions.assumptions, which would reduce our free cash flow.

In recent years, we have taken actions intended to mitigate the risk related to our defined benefit pension plans through pension risk transfer transactions whereby we purchase group annuity contracts (GACs) from insurance companies using assets from the pension trust. We expect to continue to evaluate such transactions in the future. Although under the majority of the GACs we have purchased we are relieved of all responsibility for the associated pension obligations, we have purchased and may in the future purchase GACs whereby the insurance company reimburses the pension plans but we remain responsible for paying benefits under the plans to accelerate CAS recoverycovered retirees and recover associated costs frombeneficiaries and are subject to the U.S. Government.risk that the insurance company will default on its obligations to reimburse the pension trusts. While we believe pension risk transfer transactions are beneficial; future transactions, depending on their size, could result in us making additional contributions to the pension trust and/or require us to recognize noncash settlement charges in earnings in the applicable reporting period.

For more information on how these factors could impact earnings, financial position, cash flow and stockholders’ equity, see “Critical Accounting Policies - Postretirement Benefit Plans” in Management’s Discussion and Analysis of Financial Condition and Results of Operationsthe MD&A and “Note 1211 – Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements.

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 assess risks and make assumptions regarding future schedule, cost, technical and performance issues for thousands of contracts, many of which are long-term in nature. This process can be especially difficult when estimating costs for development programs because of the inherent uncertainty in developing a new product or technology. 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 analyze 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 consolidated balance sheet as of December 31, 20202022 from previous acquisitions, which represents approximately 21%20% of our total assets. These goodwill assets are subject to annual impairment testing and more frequent testing upon the occurrence of certain events or significant changes in circumstances that indicate goodwill may be impaired. If we experience changes or factors arise that negatively affect the expected cash flows of a reporting unit, we may be required to write off all or a portion of the reporting unit’s related goodwill assets. The carrying value and fair value of our Sikorsky reporting unit are closely aligned. Therefore, any business deterioration, including the outcome of upcoming contract awards, contract cancellations or terminations, or market pressures could cause our sales, earnings and cash flows to decline below current projections and could cause goodwill and intangible assets to be impaired. Goodwill and trademarks associated with Sikorsky were approximately $3.5 billion as of December 31, 2022. Additionally, Sikorsky may not perform as expected, or demand for its products may be adversely affected by global economic conditions, including oil and gas trends that are outside of our control.

Our operationsWe are subject to and affected by a variety of federal, state, local and foreign environmentalrequirements for the protection lawsof the environment, including those for discharge of hazardous materials and regulations.remediation of contaminated sites. Due in part to the complexity and pervasiveness of these requirements, we are a party to or have property subject to various lawsuits, proceedings, and remediation obligations. These types of matters could result in fines, penalties, cost reimbursements or contributions, compensatory or treble damages or non-monetary sanctions or relief. We are involved inhave incurred and will continue to incur liabilities for 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 priorhistorical activities and those of our predecessor companies. In addition, we couldEnvironmental remediation activities usually span many years, and the extent of financial exposure can be affected by future regulations imposed or claims asserteddifficult to estimate. Among the variables management must assess in response to concerns over climate change, other aspectsevaluating costs associated with these cases and remediation sites are the status of site assessment, extent of the environment orcontamination, impacts on natural resources. We have an ongoing, comprehensive sustainability programresources, changing cost estimates, evolution of technologies used to reduceremediate the effectssite, continually evolving environmental standards, availability of insurance coverage and indemnification under existing agreements and cost allowability issues, including varying efforts by the U.S. Government to limit allowability of our operations oncosts in resolving liability at third-party-owned sites. Our environmental remediation related liabilities also could increase significantly because of acquisitions, the environment.regulation of new substances, stricter remediation standards for existing regulated substances, changes in the interpretation or enforcement of existing laws and regulations, or the discovery of previously unknown or more extensive contamination or new contaminants. For information regarding these matters, including current estimates of the amounts that we believe are required for environmental remediation to the extent probable and estimable, see “Critical Accounting Policies - Environmental Matters” in the MD&A and “Note 14 – Legal Proceedings, Commitments and Contingencies” included in our Notes to Consolidated Financial Statements.

We manage and have managed various 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, on 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. A conviction under environmental law could affect our ability to be awarded future or perform under existing U.S. Government contracts.

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“Critical Accounting Policies - Environmental Matters” in Management’s Discussion and Analysis of Financial Condition and Results of Operations and “Note 1514 – Legal Proceedings, Commitments and Contingencies” included in our Notes to Consolidated Financial Statements.

We are subject to federal, state, local and foreign requirements for the protection of the environment, including those for discharge of hazardous materials and remediation of contaminated sites. Due in part to the complexity and pervasiveness of these requirements, we are a party to or have property subject to various lawsuits, proceedings and remediation obligations. The extent of our financial exposure cannot in all cases be reasonably estimated at this time.

For information regarding the matters discussed above, including current estimates of the amounts that we believe are required for remediation or clean-up to the extent estimable, see “Critical Accounting Policies - Environmental Matters” in Management’s“Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations” and “Note 1514 – Legal Proceedings, Commitments and Contingencies” included in our Notes to Consolidated Financial Statements.

Not applicable.

Our executive officers as of January 28, 202126, 2023 are listed below, with their ages on that date, positions and offices currently held, and principal occupation and business experience during at least the last five years. There wereare no family relationships among any of our executive officers and directors. All executive officers serve at the discretion of the Board of Directors.

Mr. AmbroseCahill has served as Executive Vice President of Space since April 2013.

Ms. Hill has served as Executive Vice President of Rotary and Mission Systems (RMS) since June 2020. She previously served as Senior Vice President, Enterprise Business Transformation from June 2019 to June 2020. Prior to that, she was Deputy Executive Vice President of RMS from October 2018 to June 2019; and Senior Vice President for Corporate Strategy and Business Development from September 2017 to October 2018; and Vice President and General Manager of the former Cyber, Ships and Advanced Technologies line of business for RMS from June 2015 to September 2017.2018.

Ms. Lavan has served as Senior Vice President, General Counsel and Corporate Secretary since September 2010.

Mr. MollardScott has served as Vice President and Treasurer since April 2016. He previously served as Vice President, Corporate Financial Planning and Analysis from 2003 to April 2016.

Mr. St. John has served as Chief Operating Officer since June 2020. He previously served as Executive Vice President of RMS from August 2019 to June 2020. Prior to that, he served as Executive Vice President of MFCthe Missiles and Fire Control (MFC) business segment from January 2018 to August 2019; and as Executive Vice President and Deputy Programs in ourfor MFC segment from June 2017 to January 2018; and Vice President, Orlando Operations and Tactical Missiles/Combat Maneuver Systems business in our MFC segment from 2011 to May 2017.2018.

Mr. Taiclet has served as Chairman since March 2021 and as President and Chief Executive Officer (CEO) of Lockheed Martin since June 2020. He previouslyhas served on the Lockheed Martin Board of Directors since January 2018. Previously, he was chairman, presidentChairman, President and chief executive officerCEO of American Tower Corporation from February 2004 untilto March 20202020; and executive chairmanExecutive Chairman from March 2020 to May 2020.

At January 22, 2021,20, 2023, we had 24,92923,358 holders of record of our common stock, par value $1 per share. Our common stock is traded on the New York Stock Exchange (NYSE) under the symbol LMT.

This graph is not deemed to be “filed” with the U.S. Securities and Exchange Commission or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act), and should not be deemed to be incorporated by reference into any of our prior or subsequent filings under the Securities Act of 1933 or the Exchange Act.

There were no sales of unregistered equity securities during the quarter ended December 31, 2020.2022.

The MD&A generally discusses 20202022 and 20192021 items and year-to-year comparisons between 20202022 and 2019.2021. Discussions of 20182020 items and year-to-year comparisons between 20192021 and 20182020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results or Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20192021 filed with the SEC on February 7, 2020.January 25, 2022.

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 the products and services offered.

We operate in an environment characterized by both complexity ina complex and evolving global security environment. Our strategy consists of the design and continuing economic pressuresdevelopment of platforms and systems that meet the future requirements of 21st Century Security. Our vision for 21st Century Security is to accelerate the adoption of advanced networking and leading-edge technologies into our national defense enterprise, while enhancing the performance and value of our platforms and products for our customers. The aim of 21st Century Security is to integrate new and existing systems across all domains with advanced, open-architecture networking and operational technologies to make forces more agile, adaptive and unpredictable.

COVID-19 continued to cause business impacts in 2022. The global outbreakemergence of the coronavirus disease 2019 (COVID-19)Omicron variant in late 2021 and resulting increase in COVID-19 cases in early 2022 adversely impacted our operations and our supply chain. Our performance was declared a pandemicaffected during 2022 by the World Health Organizationsupply chain disruptions and a national emergency by the U.S. Governmentdelays, as well as labor challenges associated with employee absences, travel restrictions, site access, quarantine restrictions, remote work, and adjusted work schedules. The recovery from

The impact of COVID-19 on our operations and financial performance in future periods, including our ability to execute our programs in the expected timeframe, remains uncertain and will depend on future pandemic related developments,a number of factors, including the durationimpact of potential new COVID-19 variants or subvariants, the pandemic, any potential subsequent waveseffectiveness and adoption of COVID-19 infection, the effectiveness, distributionvaccines and acceptance of COVID-19 vaccines,therapeutics, and supplier impacts and related government actions to prevent and manage disease spread, all of which are uncertain and cannot be predicted.. The long-term impacts of COVID-19 on government budgets and other funding priorities, including international priorities, that impact demand for our products and services and our businessalso are also difficult to predict, but could negatively affect our future results and performance.

Heightened levels of operations.inflation and the potential worsening of macro-economic conditions present risks for Lockheed Martin, our suppliers and the stability of the broader defense industrial base. During 2022, we have experienced impacts to our labor rates and suppliers have signaled inflation related cost pressures, which will flow through to our costs and pricing. Although inflation did not significantly impact our financial results in 2022, if inflation remains at current levels for an extended period, or increases, and we are unable to successfully mitigate the impact, our costs are likely to increase, resulting in pressure on our profits, margins and cash flows, particularly for existing fixed-price contracts. For additional risksnew contract proposals, we are factoring into our pricing heightened levels of inflation based on accepted DoD escalation indices and other assumptions, and in some cases seeking the inclusion of economic price adjustment (EPA) clauses, which would permit, subject to the corporation related toparticular contractual terms, cost adjustments in fixed-price contracts for unexpected inflation. In addition, inflation and the COVID-19 pandemic, see Item 1A - Risk Factors.

Russia’s invasion of Ukraine has significantly elevated global geopolitical tensions and security commitmentsconcerns. As a result, we have received increased interest for some of our products and services as countries seek to improve their security posture, particularly in Europe. In addition, security assistance provided by the U.S. government to Ukraine has created U.S. government demand to replenish U.S. stockpiles, resulting in additional and potential future orders for our products. We are beginning to see this interest result in initiation of new contract discussions, however, given the long-cycle nature of our business and current industry capacity, we do not expect a significant increase in near term sales from new contracts in response to the conflict. We are evaluating capacity at our operations and the supply chain to anticipate potential demand and enable us to deliver critical capabilities. In addition, the U.S. Government and other nations have implemented broad economic sanctions and export controls targeting Russia, which combined with the U.S. military. Although we are designated as a critical infrastructure workforce, operationsconflict have been adjusted in responsethe potential to the pandemic, including, most significantly, a reduction in the F-35 production rate primarily due to supplier delays. The reduction delayed 2020 F-35 deliveries by 18 aircraft. Due to the supplier delays, we implemented a temporary schedule adjustment for the F-35 production workforce in Fort Worth, Texas. While the F-35 production workforce resumed their pre-COVID-19 work schedule in the third quarter of 2020, staffing levels at our facilities, our customer facilities, and our supplier facilities have and could continue to fluctuate as a result of COVID-19, which could negatively impact our business. In addition, countries other than the U.S. have different responses to the pandemic that can affect our international operations and the operations of our suppliers and customers. Base closures, travel restrictions, and quarantine requirements both within and outside the U.S. have affected our normal operations and resulted in some schedule delays and future or prolonged occurrences of these could adversely affect our ability to achieve future contract milestones and our results of operations.

We continuously strive to strengthen our portfolio of products and services to meet the current and future needs of our customers. We accomplish this in part by our independent research and development activities and through acquisition, divestiture and internal realignment activities.

We selectively pursue the acquisition of businesses, investments and investmentsventures at attractive valuations that will expand or complement our current portfolio and allow access to new customers or technologies. We also may explore the divestiture of

On March 28, 2022 the Administration submitted to Congress the President’s Fiscal Year (FY) 2023 budget request, which proposed $813.4 billion in total national defense spending, of which $773 billion was for the base budget of the Department of Defense (DoD).

On December 27, 2020,29, 2022, the President signed the fiscal year (FY) 2021 ConsolidatedFY 2023 Omnibus Appropriations Act providing annualinto law, which provides $858 billion in total national defense funding, of which $816.7 billion is for the DoD other government agencies, and COVID-19 relief. The appropriations provide $741base budget. This reflects a $44.6 billion in discretionary fundingincrease over the FY 2023 request for national defense (includes DoD fundingspending, and defense-related spending in energy and water development, homeland security, and military construction appropriations), of which $671a $43.7 billion is in base funding and $69 billion is Overseas Contingency Operations (OCO)/emergency funding (OCO and emergency supplemental funding do not count toward discretionary spending caps). Of the $741 billion, the DoD was allocated $704 billion, composed of $635 billion in base funding and $69 billion in OCO and emergency funding. The appropriations adhere to the Bipartisan Budget Act of 2019 (BBA 2019), which increased the spending limits for both defense and non-defense discretionary fundsincrease for the final two years (FY 2020 andDoD.

The FY 2021) of the Budget Control Act of 2011 (BCA).

The President’s FY 2024 budget request is anticipated to be submitted to Congress in March 2023, initiating the FY 2024 defense authorization and hospitals in responseappropriations legislative process. In addition to the FY 2024 budget process, Congress will have to contend with the legal limit on U.S. debt, commonly known as the debt ceiling. The current statutory limit of $31.4 trillion was reached in January, requiring the Treasury Department to take accounting measures to continue normally financing U.S. government obligations while avoiding exceeding the debt ceiling. It is expected, however, the U.S. government will exhaust these measures by June 2023. If the debt ceiling is not raised, the U.S. government may not be able to fulfill its funding obligations and there could be significant disruption to all discretionary programs and wider financial and economic distress caused byrepercussions. The federal budget and debt ceiling are expected to continue to be the coronavirus (COVID-19) pandemic. Additionally, it extends Section 3610subject of considerable congressional debate. Although we believe DoD, intelligence, and homeland security programs will continue to receive consensus support for increased funding and would likely receive priority if this scenario came to fruition, the CARES Act until March 31, 2021, which gives DoD and federal agencies discretion to reimburse contractors for any paid leave, including sick leave, a contractor provides during the pandemic to keep its employees in a ready state.effect on individual programs or Lockheed Martin cannot be predicted at this time.

A key component of our strategic plan is to grow our international sales. To accomplish this growth, we continue to focus on strengthening our relationships internationally through partnerships and joint technology efforts. We conductOur international business withis conducted either by foreign military sales (FMS) contracted through the U.S. Government or by direct commercial sales (DCS) to international customers through eachcustomers. In 2022, approximately 74% of our business segments through either FMS or direct sales to international customers.customers were FMS and about 26% were DCS. Additionally, in 2022, substantially all of our sales from international customers were in our Aeronautics, MFC and RMS business segments. Space’s sales from international customers were not material in 2022. See Item 1A - Risk Factors for a discussion of risks related to international sales.

InternationalIn 2022, international customers accounted for 31%33% of Aeronautics’ 2020 net sales. There continues to be strong international interest in the F-35 program, which includes commitments from the U.S. Government and seven international partner countries and six internationalnine FMS customers, as well as expressions of interest from other countries. The U.S. Government and the partner countries continue to work together on the design, testing, production, and sustainment of the F-35 program. Other areas of international expansion at our Aeronautics business segment include the F-16 and C-130J programs. Aeronautics received contracts in 2020 with Bulgaria and Taiwan for new F-16 aircraft, extending work beyond 2025. The C-130J Super Hercules aircraft continuedprograms, which continue to draw interest from various international customers including a contract in 2020 from New Zealand.for new aircraft.

Substantially all of our contracts are accounted for using the percentage-of-completion cost-to-cost method. Under the percentage-of-completion cost-to-cost method, we record net sales on contracts over time based upon our progress towards completion on a particular contract, as well as our estimate of the profit to be earned at completion. The following discussion of material changes in our consolidated net sales should be read in tandem with the subsequent discussion of changes in our consolidated cost of sales and our business segment results of operations because changes in our sales are typically accompanied by a corresponding change in our cost of sales due to the nature of the percentage-of-completion cost-to-cost method. Overall, our sales were negatively affected in 2022 because of supply chain impacts.

Service sales increased $711decreased $91 million, or 7%1%, in 20202022 as compared to 2019.2021. The increasedecrease in service sales was primarily due to higherlower sales of approximately $565$155 million at Aeronautics and $325 million at RMS, partially offset by lower sales of $255 million at MFC. The increase in service sales at Aeronautics was primarily due to higher sustainment volume for the F-35 and F-16 programs. The increase in service sales at RMS was primarily due to higher volume for Sikorsky helicopter programs (primarily a Seahawk sustainment program) and IWSS programs (primarily radar surveillance systems programs). The decrease in service sales at MFC was primarily due to lower volume on energy programs due to the divestiture of the Distributed Energy Solutions business, sensors and global sustainment programs (primarily Apache sensors program), and integrated air and missile defense development programs (primarily PAC-3).