What changed in this filing

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Item 1A. Risk Factors

2025-01-28 compared with 2024-01-23 · 98 added, 102 removed, 324 unchanged (38% of the section changed)

16 unchanged sentences

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 are delayed or a government shutdown were to occur and continue for an extended period of time, we could be at risk of reduced orders, program cancellations and other disruptions and nonpayment.

If appropriations are delayed or a government shutdown were to occur and continue for an extended period, we could be at risk of reduced orders, program cancellations and other disruptions and nonpayment.

When the U.S.

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Consequently, contracts are often partially funded initially, and additional funds are committed only as Congress makes further appropriations over time.

To the extent we incur costs in excess of funds obligated on a contract or in advance of a contract

award or contract definitization, we are at risk of not being reimbursed for those costs unless and until additional funds are obligated under the contract or the contract is successfully awarded, definitized and funded, which could adversely affect our results of operations, financial condition and cash flows.

To the extent we incur costs in excess of funds obligated on a contract or in advance of a contract award or contract definitization, we are at risk of not being reimbursed for those costs unless and until additional funds are obligated under the contract or the contract is successfully awarded, definitized and funded, which could adversely affect our financial condition and results of operations.

Failure to fund or the termination of significant programs or contracts by the U.S.

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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 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.

In addition, our ability to grow in key areas such as hypersonics programs, classified programs and next-generation franchise programs 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.

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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 countries’ oversight and budgeting processes.

Challenges and risks associated with this program include supplier performance, software development, definitizing and receiving 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 cycle operations, sustainment and potential contractual obligations, inflation-related cost pressures and the ability to improve affordability.

See also the “Status of the F-35 Program” in Management Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the current program status and specific challenges and risks, including with respect to Technology Refresh 3 (TR-3) configuration development and deliveries.

See also “Status of the F-35 Program” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the current program status and specific challenges and risks.

We also may not be 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.

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If a contract is terminated for default, the U.S.

Government could make claims to reduce our recovery or recoup its procurement costs and could assess other special penalties, exposing us to liability and adversely affecting our ability to compete for future

contracts and orders.

In addition, the U.S.

15 unchanged sentences

Additionally, if competitors can offer lower cost services and products, or provide services or products more quickly, at equivalent or in some cases even reduced capabilities, we may lose new business opportunities or contract recompetes, which could adversely affect our future results.

We are facing increased competition from startups and non-traditional defense contractors, which may have a lower cost structure or be able to move quickly in addition to being favored, in certain cases, by procurement policy.

We are facing increased competition from startups and non-traditional defense contractors, which may have a lower cost structure or be able to move more quickly in addition to being favored, in certain cases, by procurement policy.

Furthermore, acquisitions in our industry, including vertical integration, also could result in increased competition or limit our access to certain suppliers without appropriate remedies to protect our interests.

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Competitors may be willing to accept more risk or lower profitability in competing for contracts than we are.

Government also may not award us large competitive contracts that we otherwise might have won in an effort to maintain a broad industrial base.

Government also may not award us large competitive contracts that we otherwise might have won in an effort to strengthen a broad industrial base.

Government procurement policies and procedures and the application thereof are regularly changing, and such changes could adversely affect our profitability or the ability to win new business.

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Due to the fixed-price nature of the contracts, if our actual costs exceed our estimates, our margins and profits are reduced and we could incur a reach-forward loss.

A reach-forward loss is when estimates of total costs to be incurred on a contract exceed total estimates of the transaction price.

A reach-forward loss is when estimates of total costs to be incurred on a

contract exceed total estimates of the transaction price.

When this occurs, a provision for the entire loss is determined at the contract level and is recorded in the period in which the loss is evident.

6 unchanged sentences

Fixed-price development work or fixed-price production options, especially on competitively bid programs, is inherently riskier than cost-reimbursable work because the revenue is fixed, while the estimates of costs required to complete these contracts are subject to significant variability due to the nature of development programs.

The technical complexity coupled with the fixed-price contract structure of certain of our ongoing development programs or new programs increases the risk that our costs will be greater than anticipated, resulting in reduced margins, operating profit, or reach-forward losses during the period of contract performance or upon contract award, all of which could be significant to our operating results, cash flows, or financial condition.

Bidding upfront on fixed-price production options increases the risk that we may experience lower margins than expected, or a loss, on the production options because we must estimate the cost of producing a product before it has been developed.

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The customer may decline to exercise an option, or the customer may exercise an option on a contract for which we expect to incur a loss or perform at a low margin, either of which could adversely affect our financial results.

We are routinely subject to audit by our customers on government contracts and the results of those audits could have an adverse effect on our business, reputation and results of operations.

We are routinely subject to audit by our customers on government contracts, including audits relating to our disclosed Cost Accounting Standards (CAS) rate structure or any changes to our CAS rate structure and the results of those audits could have an adverse effect on our business, reputation and results of operations

Government agencies, including the Defense Contract Audit Agency, the Defense Contract Management Agency and various agency Inspectors General, routinely audit and investigate government contractors.

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We have unaudited or unsettled incurred cost claims related to past years, which limits our ability to issue final billings on contracts for which authorized and appropriated funds may be expiring or can result in delays in final billings and our ability to close out a contract.

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 the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, penalties, fines or suspension or debarment from doing business with the U.S.

Suspension or debarment could have a material adverse effect on us because of our dependence on contracts with the U.S.

These audits could result in unanticipated changes to contract prices and the amount and timing of payments, which could affect profitability and cash flows for any particular reporting period.

These changes could have a material impact on financial condition and results of operations in such period.

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 the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, repayments, penalties, fines or suspension or debarment from doing business with the U.S.

Reductions in the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, repayments, penalties, and fines could have a material impact on financial condition and results of operations in any particular reporting period, and suspension or debarment could have a material adverse effect on us because of our dependence on contracts with the U.S.

In addition, we could suffer serious reputational harm if allegations of impropriety were made against us.

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For example, U.S.

Government statutes and regulations impose restrictions in the sourcing of items from specified countries.

Government statutes and regulations impose restrictions on the sourcing of items from specified countries.

We seek to manage supply risk through long-term contracts, identifying domestic or other U.S.

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We also must comply with specific procurement requirements that can limit the number of eligible suppliers, and a significant number of the components or supplies used are currently single or sole sourced.

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, especially when single or sole sourced, can have an adverse impact on our business.

Because the identification and qualification of new or additional suppliers can take an extended period of time and can result in additional cost, issues with suppliers or trade actions that limit our ability to use certain suppliers, especially when single or sole sourced, can have an adverse impact on our business.

Complying with U.S.

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We remain heavily dependent on our supply chain for sourcing contractually compliant components, which is outside of our direct control and is multi-tiered.

The future occurrence of non-compliant components in our programs could cause suspensions in product deliveries, remediation work on installed components, contract price adjustments and alternate supply sourcing, all of which could adversely affect our results of operations, financial condition and cash flows.

Our success depends, in part, on our ability to develop new technologies, products and services and efficiently produce and deliver existing products.

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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.

Artificial intelligence technologies have rapidly developed and our business may be

adversely affected if we cannot successfully integrate the technology into our internal business processes and product and service offerings in a timely, cost-effective, compliant and responsible manner.

Artificial intelligence technologies have rapidly developed and our business may be adversely affected if we cannot successfully integrate the technology into our internal business processes and product and service offerings in a timely, cost-effective, compliant and responsible manner.

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 commercial entities may not be accustomed to government contracting and may be unwilling to agree to the government’s customary terms, including with respect to intellectual property, liability and indemnification term, which may prevent or lessen the benefit of collaboration.

prevent or lessen the benefit of collaboration.

We may not be successful in identifying or developing emerging technologies and may spend significant resources on projects that ultimately are unsuccessful or yield a low return on the amount invested.

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This digital transformation effort requires substantial investment and if we are unable to successfully implement the strategy or do so in a timely manner, our results of operations and future competitiveness may be adversely affected.

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 obtaining new contracts or winning all or a portion of next generation programs, including in key areas such as hypersonics and classified work, and this could adversely affect our future performance and financial results.

Geopolitical, macroeconomic and public health events and conditions could adversely affect our business, operating results, financial condition and cash flows.

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 or develop new technologies or offerings faster, we may be unsuccessful in obtaining new contracts or winning all or a portion of next generation programs, including in key areas such as hypersonics and classified work, and this could adversely affect our future performance and financial results.

Geopolitical, macroeconomic and public health events and conditions could adversely affect our business, financial condition and operating results.

Geopolitical .

Our business is highly sensitive to geopolitical and security issues, including foreign policy actions taken by governments such, as tariffs, sanctions, embargoes, export and import controls and other trade restrictions, which can affect the demand for our products and services, the ability to sell our products and services, and disrupt our supply chain, all of which could adversely affect our business.

Global conflicts, including Russia’s invasion of Ukraine, have significantly elevated global geopolitical tensions and security concerns.

The conflict has resulted in increased demand for some of our products and services;

however, if we are unable to increase production to meet demand on the timeframe expected by potential customers, whether it be from supply constraints, government funding or otherwise, then we may lose sales opportunities as they seek alternatives, even less capable ones, that may be able to be delivered more quickly.

In addition, the U.S.

Government and other nations have implemented broad economic sanctions and export controls targeting Russia, which, combined with the Ukraine conflict, has indirectly disrupted the global supply chain and increased pressures on certain resources.

The Ukraine conflict also has increased the threat of malicious cyber activity from nation states and other actors.

China’s Ministry of Commerce announced in 2023 that it had added Lockheed Martin Corporation to its “unreliable entities list” in connection with certain foreign military sales by the U.S.

Government to Taiwan involving our products and services, and that it would impose certain sanctions against us, including a fine equal to twice the value of the arms that we had sold to Taiwan since September 2020.

In addition, China prohibited our CEO, COO and CFO from traveling or working in China.

Changes in U.S.

government and other nations’ administration and their associated shifts in policy and priorities could also impact our operations and market conditions.

Our business is highly sensitive to geopolitical and security issues, including foreign policy actions taken by governments such as tariffs, sanctions, embargoes, export and import controls, and other trade restrictions, which can affect the demand for, and our ability to sell, our products and services, cause disruptions to our supply chain, and, ultimately, could adversely affect our business.

Global conflicts, including Russia’s invasion of Ukraine, conflicts in the Middle East, and heightened tensions in the Pacific region, have significantly elevated global geopolitical tensions and security concerns and resulted in increased demand for some of our products and services.

However, if we are unable to increase production to meet demand in the timeframe expected by potential customers, whether due to supply constraints, government funding, or otherwise, then we may lose sales opportunities as those possible customers seek alternatives, even less capable ones, that may be delivered more quickly.

Furthermore, the level of continuing demand and our ability to sell to customers to meet that demand is subject in part to changes in government policies and priorities.

Economic sanctions, export controls, and other trade restrictions, for instance those that the U.S.

Government and other nations implemented against Russia in light of its invasion of Ukraine or those relating to the conflict in the Middle East, could directly and indirectly result in the disruption of our business and supply chain.

Conflicts in Ukraine and elsewhere have increased the threat of malicious cyber activity from nation states and other actors.

China has placed restrictions on and sanctioned our company and certain executives in connection with foreign military sales by the U.S.

Government to Taiwan involving our products and services.

We will continue to follow official U.S.

Government guidance as it relates to sales to Taiwan and do not currently expect a material impact to our business from these actions.

In 2023, China also implemented broad-based export restrictions on certain minerals used in the production, among other things, of semiconductors and missile systems.

If China were to further restrict the export of certain materials, take further actions to enforce the existing sanctions on us or impose additional sanctions, or impose sanctions on our suppliers, teammates or partners, our business could be adversely affected.

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 or the transfer of sensitive technology, the imposition of sanctions, or Congressional action to restrict sales of our products.

In 2023, China also implemented broad-based export restrictions on certain minerals used in the production of, among other things, semiconductors and missile systems;

in 2024, China specifically banned export of certain minerals to the U.S.

China may impose additional sanctions that could adversely affect Lockheed Martin, our suppliers, teammates and/or partners in the future.

Our international sales also could be adversely affected by actions taken by the U.S.

Government, including the exercise of foreign policy, Congressional oversight or the financing of particular programs, that may prevent, restrict or otherwise impose conditions upon the sale and delivery of our products or the transfer of sensitive technology.

For example, the U.S.

Government has imposed certain sanctions on Türkish entities and persons, which has affected our ability to obtain certain U.S.

export permits or authorizations necessary to perform under our existing contracts supporting the Türkish Utility Helicopter Program (TUHP), our work with Türkish industry and our opportunity for sales in Türkiye generally.

export permits or authorizations necessary to perform under our existing contracts supporting the Türkish Utility Helicopter Program (TUHP), and could impact our work with Türkish industry and our opportunity for sales in Türkiye generally.

See “Note 1 – Organization and Significant Accounting Policies” included in our Notes to Consolidated Financial Statements for more information on TUHP.

Our inability to perform under contracts with international customers as a result of actions taken by the U.S.

Government has resulted and may in the future result in our inability to recover our costs and reach forward losses, claims and contract terminations by these customers and suppliers, which could have an adverse effect on our operating results.

Our inability to perform under, or compete for, contracts with international customers because of actions taken by the U.S.

Government has resulted and may in the future result in our inability to recover our costs, incurrence of reach-forward losses, claims and contract terminations by these customers and suppliers, and limitations on our ability to pursue new business, which could have an adverse effect on our operating results.

Macroeconomic.

Heightened levels of inflation and the potential worsening of macro-economic conditions, including slower growth or recession, changes to fiscal and monetary policy, tighter credit, higher interest rates and currency fluctuations, present a risk for us, our suppliers and the stability of the broader defense industrial base.

If we are unable to successfully

mitigate the impact of inflation, our profits, margins and cash flows, particularly for existing fixed-price contracts, may be adversely affected.

Although we believe defense spending is more resilient to adverse macro-economic conditions than many other industrial sectors, our suppliers and other partners, many of which are more exposed to commercial markets or have fewer resources, may be adversely impacted to a more significant degree than we are by an economic downturn, which could affect their performance and adversely impact our operations.

In addition, macroeconomic conditions could cause budgetary pressures for our government customers resulting in reductions or delays in spending, which could adversely impact our business.

Heightened levels of inflation and the potential worsening of macroeconomic conditions, including slower growth or recession, changes to fiscal and monetary policy, tighter credit, higher interest rates and currency fluctuations, present risks for us, our suppliers and the stability of the broader defense industrial base.

If we are unable to successfully mitigate the impact, our future profits, margins and cash flows, particularly for existing fixed-price contracts, may be adversely affected.

Although we believe defense spending is more resilient to adverse macroeconomic conditions than many other industrial sectors, our suppliers and other partners, many of which are more exposed to commercial markets or have fewer resources, may be adversely impacted to a more significant degree than we are by an economic downturn.

Such an impact could affect their performance and adversely impact our operations.

In addition, macroeconomic conditions could cause budgetary

pressures for our government customers resulting in reductions or delays in spending, which could adversely impact our business.

Higher interest rates increase the borrowing costs on new debt and could affect the fair value of our investments.

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Public health.

We face a wide variety of risks related to public health crises, epidemics, pandemics or similar events, including COVID-19.

If a new health epidemic or outbreak were to occur, we could experience broad and varied impacts similar to the impact of COVID-19, including adverse impacts to our workforce and supply chain, inflationary pressures and increased costs, schedule or production delays, market volatility and other financial impacts.

We face a wide variety of risks related to public health crises, epidemics, pandemics or similar events.

If a new health epidemic or outbreak were to occur, we could experience broad and varied effects similar to the impact of COVID-19, including adverse impacts to our workforce and supply chain, inflationary pressures and increased costs, schedule or production delays, market volatility and other financial ramifications.

If any of these were to occur, our future results and performance could be adversely impacted.

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International sales present risks that are different and potentially greater than those encountered in our U.S.

In 2023, 26% of our total net sales were from international customers.

In 2024, 26% of our total net sales were associated with international customers.

International sales are subject to numerous political and economic factors, including changes in foreign national priorities, foreign government budgets, global economic conditions, and fluctuations in foreign currency exchange rates, the possibility of trade sanctions and other government actions, regulatory requirements, significant competition, taxation, and other risks associated with doing business outside the U.S.

1 unchanged sentence

export regulations and foreign policy, and there could be significant delays or other issues in reaching definitive agreements for announced programs.

See the Risk Factor “Geopolitical, macroeconomic and public health events and conditions could adversely affect our business, operating results, financial condition and cash flows.” Competition for international sales is intense, including from 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.

See the Risk Factor “Geopolitical, macroeconomic and public health events and conditions could adversely affect our business, financial condition and operating results.” Competition for international sales is intense, including from 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 FMS contracted through the U.S.

Government and by direct commercial sales (DCS) to international customers.

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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.

Government functions as an intermediary in FMS sales, we are reliant on, and could be adversely impacted by, the capacity and speed of the DoD’s administration of requests from non-U.S.

countries to convert requests to sales.

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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, some of our existing offset 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 of breaching our obligations,

exposing us to compliance risks of the joint venture, and impairing our ability to recover our investment.

For more information on 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.

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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.

Government may use or authorize others, including competitors, to use such intellectual property.

Government may use, or may authorize others including competitors to use, such intellectual property.

governments also may have certain rights in patents and other intellectual property developed in performance of our contracts with these entities.

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.

Government is pursuing aggressive positions on the acquisition of broad data and software packages as well as the scope and applicability of these rights once acquired.

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, with the potential impacts of this policy or any associated regulatory changes on future acquisitions yet to be determined.

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.

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Our business and financial performance depends on us identifying, attracting and retaining a highly skilled workforce.

Our performance is dependent upon us identifying, attracting, developing, motivating and retaining 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 performance is dependent upon us identifying, attracting, developing, motivating and retaining a highly skilled workforce with the requisite skills in multiple areas including engineering, science, manufacturing, information technology, cybersecurity, business development and strategy and management.

Due to the national security nature of our work, our 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.

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If we cannot adequately attract and retain personnel with the requisite skills or clearances in this competitive market, our performance and future prospects may be adversely affected.

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 under our hybrid workforce model.

If we are unable to effectively adapt to this hybrid work environment long term, then we may experience a less cohesive workforce, increased attrition, reduced program performance and less innovation.

It is also critical that we develop and train employees, hire new qualified personnel, and successfully manage the short and long-term transfer of critical knowledge and skills, including leadership development and succession planning throughout our business.

Since the COVID-19 pandemic, we have implemented flexible work arrangements and a hybrid workforce model, where portions of our workforce work remotely while others are required to be on-site in our facilities depending on, among other things, the nature of the job performed, business needs, and evolving circumstances.

In conjunction with this, it is critical that we develop and train employees, hire new qualified personnel, and successfully manage the short and long-term transfer of critical 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.

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Union actions at suppliers also can 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.

Cyber-attacks and other security threats and disruptions could have a material adverse affect on our business.

As an aerospace and defense company, we face a multitude of security threats, including cybersecurity threats ranging from attacks common to most industries, such as ransomware and denial-of-service, to attacks from more advanced and persistent, highly organized adversaries, including nation state actors, which target the defense industrial base and other critical infrastructure sectors.

The sophistication of the threats continue to evolve and grow, including the risk associated with the use of emerging technologies, such as artificial intelligence and quantum computing, for nefarious purposes.

In addition to cybersecurity threats, we face threats to the security of our facilities and employees from terrorist acts, sabotage or other disruptions, any of which could adversely affect our business.

The improper conduct of our employees or others working on behalf of us who have access to export controlled, classified or other sensitive information could also adversely affect our business and reputation.

Our customers (including sites that we operate and manage for our customers), suppliers, subcontractors and joint venture partners, experience similar security threats.

If we are unable to protect sensitive information, including complying with evolving information security, data protection and privacy regulations, our customers or governmental authorities could investigate the adequacy of our threat mitigation and detection processes and procedures;

Any delays or work stoppages could adversely affect our ability to perform under our contracts, which could negatively impact our financial condition and results of operations.

Cyber-attacks and other security threats and disruptions could have a material adverse effect on our business.

As an aerospace and defense company, we face a multitude of security threats, including cybersecurity threats ranging from attacks common to most industries, such as ransomware and denial-of-service, to attacks from more advanced and persistent, highly organized adversaries, including nation state actors, some of which target the defense industrial base and other critical infrastructure sectors.

The sophistication of the threats continues to evolve and grow, including the risk associated with the use of emerging technologies, such as artificial intelligence and quantum computing, for nefarious purposes.

In addition to cybersecurity threats, we face threats to the security of our facilities and employees from terrorist acts, sabotage and other disruptions, any of which could adversely affect our business.

The improper conduct of our employees or others working on our

behalf who have access to export controlled, classified or other sensitive information could also adversely affect our business and reputation.

If we are unable to protect sensitive information, including by complying with evolving information security, data protection and privacy regulations and related disclosure requirements, our customers or governmental authorities could investigate the adequacy of our threat mitigation and detection processes and procedures;

and could bring actions against us for noncompliance with applicable laws and regulations.

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 subcontractors, suppliers and vendors) could be compromised, which could adversely affect our business.

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 that of subcontractors, suppliers and vendors) could be compromised, which could adversely affect our business.

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 and financial results.

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National security considerations may also preclude us from publicly disclosing a cybersecurity incident.

Our customers, suppliers, subcontractors, joint venture partners and acquired entities face similar security threats and an incident at one of these entities could adversely impact our business.

Our customers (including sites that we operate and manage for our customers), suppliers, subcontractors, joint venture partners and acquired entities face similar security threats and an incident at one of these entities could adversely impact our business.

These entities are typically outside our control and may have access to our information with varying levels of security and cybersecurity resources, expertise, safeguards and capabilities.

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Adversaries actively seek to exploit security and cybersecurity weaknesses in our supply chain.

Breaches in our multi-tiered supply chain, which is comprised of thousands of direct and indirect suppliers, has and could in the future compromise our data and adversely affect customer deliverables.

Breaches in our multi-tiered supply chain, which is comprised of thousands of direct and indirect suppliers, have and could in the future compromise our data and adversely affect customer deliverables.

We also must rely on our supply chain for adequately detecting and reporting cyber incidents, which could affect our ability to report or respond to cybersecurity incidents effectively or in a timely manner.

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regulators have increased their scrutiny of mergers and acquisitions in recent years, which could continue to limit our ability to execute certain transactions that we might otherwise pursue.

Acquisition, divestiture, joint venture and investment transactions often require substantial management resources and have the potential to divert our attention from our existing business.

Acquisitions, divestitures, joint ventures and investments often require substantial management resources and have the potential to divert our attention from our existing business.

Unidentified or identified but uncertain liabilities that are not covered by indemnification or other coverage could adversely affect our future financial results.

This is particularly the 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), 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.

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.

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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 operations.

We also could be adversely affected by, or liable for, actions taken by these joint ventures that we do not control, including violations of anti-corruption, import and export, taxation and anti-boycott laws.

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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.

We make investments in early-stage companies that we believe are advancing or developing new technologies applicable to our businesses.

We make investments in early-stage companies that we believe are advancing or developing new technologies applicable to our business.

These investments are generally illiquid at the time of investment and typically we hold a non-controlling interest.

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Changes in these factors, including actual returns on plan assets, may also affect our plan funding, cash flows and stockholders’ equity.

We could be required to make pension contributions earlier and/or in excess than planned if our return on pension assets is less than our assumptions, which would reduce our free cash flow.

With regard to cash flow, we have made substantial cash contributions to our plans as required by the Employee Retirement Income Security Act of 1974 (ERISA), as amended, and expect to make future contributions as required or when deemed prudent.

We could be required to make pension contributions earlier than and/or in excess of what was planned if our return on pension assets is less than our assumptions, which would reduce our free cash flow.

We have made substantial cash contributions to our plans as required by the Employee Retirement Income Security Act of 1974 (ERISA), as amended, and in accordance with U.S.

Government Cost Accounting Standards (CAS), and expect to make future contributions as required or when deemed prudent.

We generally can recover a significant portion of these contributions related to our plans as allowable costs on our U.S.

Government contracts, including FMS.

However, there is a lag between the time when we contribute cash to our plans under pension funding rules and when we recover pension costs under U.S.

Government Cost Accounting Standards (CAS), which can affect the timing of our cash flows.

However, there can be differences between the time when we contribute cash to our plans under pension funding rules and when we recover pension costs under CAS, which can affect the timing of our cash flows.

Our business segments’ results of operations include pension expense as calculated under CAS while our consolidated financial statements must present pension income or expense in accordance with U.S.

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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 covered retirees and beneficiaries and are subject to the 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 the MD&A and “Note 11 – Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements.

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 covered retirees and beneficiaries and are subject to the risk that the insurance company will default on its obligations to reimburse the pension trust.

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 financial condition and results of operations, see “Critical Accounting Policies – Postretirement Benefit Plans” in the MD&A and “Note 11 – Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements.

Our estimates and projections may prove to be inaccurate and certain of our assets may be at risk of future impairment.

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This process can be especially difficult when estimating costs for development programs because of the inherent uncertainty in developing a new product or technology.

Because of the significance of the judgments and estimation processes involved in accounting for our contracts, materially different amounts or revenue and operating profit could be recorded if we used different assumptions or if the underlying circumstances were to change.

Because of the significance of the judgments and estimation processes involved in accounting for our contracts, materially different amounts of revenue and operating profit could be recorded if we used different assumptions or if the underlying circumstances were to change.

Changes in underlying assumptions, circumstances or estimates may adversely affect our future financial condition and results of operations.

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 several 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.

For acquisitions we may use a one-year measurement period to analyze and assess several 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 $11.1 billion of goodwill assets recorded on our consolidated balance sheet as of December 31, 2024 from previous acquisitions, which represents approximately 20% of our total assets.

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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.

The final resolution of tax audits and any related administrative reviews or litigation could result in unanticipated increases in our tax expense and changes to the timing of required tax payments, which could affect profitability and cash flows for any particular reporting period.

These increases or changes could have a material impact on financial condition and results of operations in such period.

Our business involves significant risks and uncertainties that may not be covered by indemnity or insurance.

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We seek to obtain insurance coverage from established and reputable insurance carriers to the extent available in order to cover these risks and liabilities.

However, the amount of insurance coverage that we maintain or that is available to purchase in the market may not be adequate to cover all claims or liabilities.

However, the amount of insurance coverage that we maintain or that is available to purchase in the market may not be adequate to cover all claims or liabilities and we may self-insure certain types of risk.

Insurance coverage is subject to the terms and conditions of the insurance contract and is further subject to any sublimits, exclusions, restrictions, or defenses, including standard exclusions for acts of war.

Existing coverage is renewed annually and may be canceled pursuant to the terms of the policies 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, fires or extreme weather conditions, some of which may be exacerbated by climate change.

Existing coverage is renewed annually and may be canceled pursuant to the terms of the policies 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, fires or extreme weather conditions, some of which may be exacerbated by climate change.

We have significant operations in geographic areas prone to these risks, such as in California, Florida and Texas, and certain of our properties have suffered damage from natural disasters in the past and may again in the future.

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Additionally, disputes with insurance carriers over coverage terms or the insolvency of one or more of our insurance carriers may significantly affect the amount or timing of our cash flows.

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, and operating results.

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 and operating results.

Any accident, failure of, or defect in our products or services, even if fully indemnified or insured, could negatively affect our reputation among our customers and the public and make it more difficult for us to compete effectively.

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The increasing global regulatory focus on greenhouse gas (GHG) emissions and their potential impacts relating to climate change could result in laws, regulations or policies that significantly increase our direct and indirect operational and compliance burdens, which could adversely affect our financial condition 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 procurement laws.

Changes in government

procurement laws that mandate or take into account climate change considerations, such as the contractor’s GHG emissions, GHG emission reduction targets, 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, or our ability to bid at all.

Changes in government procurement laws that mandate or take into account climate change considerations, such as the contractor’s GHG emissions, GHG emission reduction targets, 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, or our ability to bid at all.

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 sectors of the economy.

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In addition, climate change-related litigation and investigations have increased in recent years and any claims or investigations against us could be costly to defend and our business could be adversely affected by the outcome.

We are involved in several legal proceedings.

We are involved in a number of legal proceedings.

We cannot predict the outcome of litigation and other contingencies with certainty.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors