SEC Filing | Lockheed Martin Corp

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lmt-20210328

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 28, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number: 1-11437

LOCKHEED MARTIN CORPORATION

(Exact name of registrant as specified in its charter)

Maryland

52-1893632

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

6801 Rockledge Drive,

Bethesda,

Maryland

20817

(Address of principal executive offices)

(Zip Code)

(301) 897-6000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $1 par value	LMT	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non–accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 277,933,985 shares of our common stock, $1 par value per share, outstanding as of April 16, 2021.

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Lockheed Martin Corporation

Form 10-Q

For the Quarterly Period Ended March 28, 2021

Table of Contents


			Page

PART I. FINANCIAL INFORMATION

	ITEM 1.	Financial Statements (Unaudited)

		Consolidated Statements of Earnings for the Quarters Ended March 28 , 202 1 and March 29, 2020	3

		Consolidated Statements of Comprehensive Income for the Quarters Ended March 28, 2021 and March 29, 2020	4

		Consolidated Balance Sheets as of March 28, 2021 and December 31, 20 20	5

		Consolidated Statements of Cash Flows for the Quarters Ended March 28, 2021 and March 29, 2020	6

		Consolidated Statements of Equity for the Quarters Ended March 28, 2021 and March 29, 2020	7



		Notes to Consolidated Financial Statements	8

		Report of Independent Registered Public Accounting Firm	24

	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	40

	ITEM 4.	Controls and Procedures	40

PART II. OTHER INFORMATION

	ITEM 1.	Legal Proceedings	42

	ITEM 1A.	Risk Factors	42

	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43

	ITEM 6.	Exhibits	44

SIGNATURE			45

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Lockheed Martin Corporation

Consolidated Statements of Earnings

(unaudited; in millions, except per share data)



	Quarters Ended
		March 28, 2021			March 29, 2020
Net sales
Products			$	13,753		$	13,166
Services			2,505			2,485
Total net sales			16,258			15,651
Cost of sales
Products			(12,281)			(11,742)
Services			(2,230)			(2,213)
Severance and restructuring charges			(36)			—
Other unallocated, net			475			395
Total cost of sales			(14,072)			(13,560)
Gross profit			2,186			2,091
Other (expense) income, net			(4)			31
Operating profit			2,182			2,122
Interest expense			(140)			(148)
Other non-operating income, net			169			56
Earnings before income taxes			2,211			2,030
Income tax expense			(374)			(313)


Net earnings			$	1,837		$	1,717

Earnings per common share
Basic			$	6.58		$	6.10



Diluted			$	6.56		$	6.08




Cash dividends paid per common share			$	2.60		$	2.40

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Lockheed Martin Corporation

Consolidated Statements of Comprehensive Income

(unaudited; in millions)



	Quarters Ended
	March 28, 2021	March 29, 2020
Net earnings		$	1,837	$	1,717
Other comprehensive income, net of tax
Recognition of previously deferred postretirement benefit plan amounts		140		110
Other, net		(27)		(97)
Other comprehensive income, net of tax		113		13
Comprehensive income		$	1,950	$	1,730

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Lockheed Martin Corporation

Consolidated Balance Sheets

(in millions, except par value)


	March 28, 2021		December 31, 2020
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	2,933	$	3,160
Receivables, net	2,214		1,978
Contract assets	10,908		9,545
Inventories	3,256		3,545
Other current assets	941		1,150
Total current assets	20,252		19,378
Property, plant and equipment, net	7,213		7,213
Goodwill	10,799		10,806
Intangible assets, net	2,930		3,012
Deferred income taxes	3,375		3,475
Other noncurrent assets	6,868		6,826
Total assets	$	51,437	$	50,710
Liabilities and equity
Current liabilities
Accounts payable	$	1,889	$	880
Contract liabilities	7,255		7,545
Salaries, benefits and payroll taxes	2,794		3,163
Current maturities of long-term debt	506		500
Other current liabilities	2,273		1,845
Total current liabilities	14,717		13,933
Long-term debt, net	11,657		11,669
Accrued pension liabilities	12,643		12,874
Other noncurrent liabilities	6,087		6,196
Total liabilities	45,104		44,672
Stockholders’ equity
Common stock, $1 par value per share	278		279
Additional paid-in capital	65		221
Retained earnings	21,977		21,636
Accumulated other comprehensive loss	(16,008)		(16,121)
Total stockholders’ equity	6,312		6,015
Noncontrolling interests in subsidiary	21		23
Total equity	6,333		6,038
Total liabilities and equity	$	51,437	$	50,710

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Lockheed Martin Corporation

Consolidated Statements of Cash Flows

(unaudited; in millions)


	Quarters Ended
	March 28, 2021		March 29, 2020
Operating activities
Net earnings	$	1,837	$	1,717
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	336		301
Stock-based compensation	47		42



Severance and restructuring charges	36		—

Changes in assets and liabilities
Receivables, net	(236)		(555)
Contract assets	(1,363)		(1,095)
Inventories	289		80
Accounts payable	1,023		1,894
Contract liabilities	(290)		151
Postretirement benefit plans	(66)		(39)
Income taxes	301		167
Other, net	(166)		(349)
Net cash provided by operating activities	1,748		2,314
Investing activities
Capital expenditures	(281)		(293)
Other, net	112		(2)
Net cash used for investing activities	(169)		(295)
Financing activities
Dividends paid	(739)		(693)
Repurchases of common stock	(1,000)		(756)



Other, net	(67)		(96)
Net cash used for financing activities	(1,806)		(1,545)
Net change in cash and cash equivalents	(227)		474
Cash and cash equivalents at beginning of period	3,160		1,514
Cash and cash equivalents at end of period	$	2,933	$	1,988

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Lockheed Martin Corporation

Consolidated Statements of Equity

(unaudited; in millions)



	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests in Subsidiary		Total Equity
Balance at December 31, 2020	$	279	$	221	$	21,636	$	(16,121)	$	6,015	$	23	$	6,038
Net earnings	—		—		1,837		—		1,837		—		1,837
Other comprehensive income, net of tax	—		—		—		113		113		—		113
Dividends declared	—		—		(725)		—		(725)		—		(725)
Repurchases of common stock	(2)		(227)		(771)		—		(1,000)		—		(1,000)
Stock-based awards, ESOP activity and other	1		71		—		—		72		—		72
Net decrease in noncontrolling interests in subsidiary	—		—		—		—		—		(2)		(2)
Balance at March 28, 2021	$	278	$	65	$	21,977	$	(16,008)	$	6,312	$	21	$	6,333

Balance at December 31, 2019	$	280	$	—	$	18,401	$	(15,554)	$	3,127	$	44	$	3,171
Net earnings	—		—		1,717		—		1,717		—		1,717
Other comprehensive income, net of tax	—		—		—		13		13		—		13
Dividends declared	—		—		(677)		—		(677)		—		(677)
Repurchases of common stock	(2)		(29)		(733)		—		(764)		—		(764)
Stock-based awards, ESOP activity and other	1		29		—		—		30		—		30
Net decrease in noncontrolling interests in subsidiary	—		—		—		—		—		(3)		(3)
Balance at March 29, 2020	$	279	$	—	$	18,708	$	(15,541)	$	3,446	$	41	$	3,487

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited)

NOTE 1 - BASIS OF PRESENTATION

We prepared these consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission (SEC) Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.

In the opinion of management, these consolidated financial statements reflect all adjustments that are of a normal recurring nature necessary for a fair presentation of our results of operations, financial condition, and cash flows for the interim periods presented. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates. Significant estimates inherent in the preparation of our consolidated financial statements include, but are not limited to, accounting for sales and cost recognition; postretirement benefit plans; environmental liability and assets for the portion of environmental costs that are probable of future recovery; evaluation of goodwill; intangible assets; investments and other assets for impairment; income taxes including deferred tax assets; fair value measurements; and contingencies. The consolidated financial statements include the accounts of subsidiaries we control and variable interest entities if we are the primary beneficiary. We eliminate intercompany balances and transactions in consolidation.

We close our books and records on the last Sunday of the calendar quarter to align our financial closing with our business processes. The consolidated financial statements and tables of financial information included herein are labeled based on that convention. This practice only affects interim periods as our fiscal year ends on December 31.

The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the full year or future periods. Unless otherwise noted, we present all per share amounts cited in these consolidated financial statements on a “per diluted share” basis. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Form 10-K).

NOTE 2 - PENDING ACQUISITION OF AEROJET ROCKETDYNE

On December 20, 2020, we entered into an agreement to acquire Aerojet Rocketdyne Holdings, Inc. (“Aerojet Rocketdyne”) for $51.00 per share, which is net of a $5.00 per share special cash dividend Aerojet Rocketdyne paid to its stockholders on March 24, 2021. This represents a post-dividend equity value of approximately $4.6 billion, on a fully diluted as-converted basis, and a transaction value of approximately $4.4 billion after the assumption of Aerojet Rocketdyne’s projected net cash. We expect to finance the acquisition through a combination of cash on hand and new debt issuances. The transaction was approved by Aerojet Rocketdyne’s stockholders on March 9, 2021, which was a closing condition. The transaction is expected to close in the later part of 2021, subject to receipt of regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and satisfaction of other closing conditions specified in the acquisition agreement. Our financial results will not include Aerojet Rocketdyne’s results until the acquisition is closed.

NOTE 3 - EARNINGS PER COMMON SHARE

The weighted average number of shares outstanding used to compute earnings per common share were as follows (in millions):


	Quarters Ended
	March 28, 2021	March 29, 2020
Weighted average common shares outstanding for basic computations	279.0	281.3
Weighted average dilutive effect of equity awards	1.0	1.3
Weighted average common shares outstanding for diluted computations	280.0	282.6

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

We compute basic and diluted earnings per common share by dividing net earnings by the respective weighted average number of common shares outstanding for the periods presented. Our calculation of diluted earnings per common share also includes the dilutive effects for the assumed vesting of outstanding restricted stock units (RSUs) and performance stock units (PSUs) and exercise of outstanding stock options based on the treasury stock method. There were no significant anti-dilutive equity awards during the quarters ended March 28, 2021 or March 29, 2020.

NOTE 4 - INFORMATION ON BUSINESS SEGMENTS

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

Net sales and operating profit of our business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation. Business segment operating profit includes our share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of our business segments.

Business segment operating profit also excludes the FAS/CAS pension operating adjustment, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, stock-based compensation expense, retiree benefits, significant severance actions, significant asset impairments, gains or losses from divestitures, and other miscellaneous corporate activities. Excluded items are included in the reconciling item “Unallocated items” between operating profit from our business segments and our consolidated operating profit. See “Note 11 - Other” for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments.

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Summary operating results for each of our business segments were as follows (in millions):



	Quarters Ended
	March 28, 2021		March 29, 2020
Net sales
Aeronautics	$	6,387	$	6,369
Missiles and Fire Control	2,749		2,619
Rotary and Mission Systems	4,107		3,746
Space	3,015		2,917
Total net sales	$	16,258	$	15,651
Operating profit
Aeronautics	$	693	$	672
Missiles and Fire Control	396		396
Rotary and Mission Systems	433		376
Space	227		281
Total business segment operating profit	1,749		1,725
Unallocated items
FAS/CAS operating adjustment	489		469
Stock-based compensation	(47)		(42)

Severance and restructuring charges	(36)		—
Other, net	27		(30)
Total unallocated items	433		397
Total consolidated operating profit	$	2,182	$	2,122
Intersegment sales
Aeronautics	$	53	$	59
Missiles and Fire Control	129		136
Rotary and Mission Systems	478		499
Space	82		108
Total intersegment sales	$	742	$	802

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

We recover CAS pension and other postretirement benefit plan cost through the pricing of our products and services on U.S. Government contracts and, therefore, recognize CAS cost in each of our business segment’s net sales and cost of sales. Our consolidated financial statements must present FAS pension and other postretirement benefit plan expense calculated in accordance with FAS requirements under U.S. GAAP. The operating portion of the net FAS/CAS pension adjustment represents the difference between the service cost component of FAS pension income and total CAS pension cost. The non-service FAS pension income component is included in other non-operating income, net in our consolidated statements of earnings. As a result, to the extent that CAS pension cost exceeds the service cost component of FAS pension income, we have a favorable FAS/CAS operating adjustment.

Our total net FAS/CAS pension adjustment for the quarters ended March 28, 2021 and March 29, 2020, including the service and non-service cost components of FAS pension income for our qualified defined benefit pension plans, were as follows (in millions):


	Quarters Ended
	March 28, 2021		March 29, 2020
Total FAS income and CAS costs
FAS pension income	$	66	$	30
Less: CAS pension cost	516		494
Net FAS/CAS pension adjustment	$	582	$	524

Service and non-service cost reconciliation
FAS pension service cost	$	(27)	$	(25)
Less: CAS pension cost	516		494
FAS/CAS operating adjustment	489		469
Non-operating FAS pension income	93		55
Net FAS/CAS pension adjustment	$	582	$	524

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Net sales by products and services, contract type, customer, and geographic region were as follows (in millions):


	Quarter Ended March 28, 2021
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	5,479	$	2,410	$	3,300	$	2,564	$	13,753
Services	908		339		807		451		2,505
Total net sales	$	6,387	$	2,749	$	4,107	$	3,015	$	16,258
Net sales by contract type
Fixed-price	$	4,734	$	1,878	$	2,677	$	614	$	9,903
Cost-reimbursable	1,653		871		1,430		2,401		6,355
Total net sales	$	6,387	$	2,749	$	4,107	$	3,015	$	16,258
Net sales by customer
U.S. Government	$	4,273	$	2,041	$	2,810	$	2,551	$	11,675
International (a)	2,099		703		1,220		457		4,479
U.S. commercial and other	15		5		77		7		104
Total net sales	$	6,387	$	2,749	$	4,107	$	3,015	$	16,258
Net sales by geographic region
United States	$	4,288	$	2,046	$	2,887	$	2,558	$	11,779
Asia Pacific	893		51		650		2		1,596
Europe	854		182		201		455		1,692
Middle East	284		458		170		—		912
Other	68		12		199		—		279
Total net sales	$	6,387	$	2,749	$	4,107	$	3,015	$	16,258


	Quarter Ended March 29, 2020
	Aeronautics		MFC		RMS		Space		Total
Net sales
Products	$	5,455	$	2,275	$	2,986	$	2,450	$	13,166
Services	914		344		760		467		2,485
Total net sales	$	6,369	$	2,619	$	3,746	$	2,917	$	15,651
Net sales by contract type
Fixed-price	$	4,584	$	1,718	$	2,482	$	519	$	9,303
Cost-reimbursable	1,785		901		1,264		2,398		6,348
Total net sales	$	6,369	$	2,619	$	3,746	$	2,917	$	15,651
Net sales by customer
U.S. Government	$	4,033	$	1,955	$	2,788	$	2,483	$	11,259
International (a)	2,321		660		855		420		4,256
U.S. commercial and other	15		4		103		14		136
Total net sales	$	6,369	$	2,619	$	3,746	$	2,917	$	15,651
Net sales by geographic region
United States	$	4,048	$	1,959	$	2,891	$	2,497	$	11,395
Asia Pacific	995		75		318		28		1,416
Europe	948		168		167		398		1,681
Middle East	328		407		207		(6)		936
Other	50		10		163		—		223
Total net sales	$	6,369	$	2,619	$	3,746	$	2,917	$	15,651

(a)International sales include FMS contracted through the U.S. Government and direct commercial sales to international governments and other international customers.

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

Our Aeronautics business segment includes our largest program, the F-35 Lightning II Joint Strike Fighter, an international multi-role, multi-variant, stealth fighter aircraft. Net sales for the F-35 program represented approximately 27% of our total consolidated net sales for the quarter ended March 28, 2021 and 28% of our total consolidated net sales for the quarter ended March 29, 2020.

Total assets for each of our business segments were as follows (in millions):


	March 28, 2021		December 31, 2020
Assets
Aeronautics	$	10,709	$	9,903
Missiles and Fire Control	5,058		4,966
Rotary and Mission Systems	17,885		18,035
Space	6,850		6,451
Total business segment assets	40,502		39,355
Corporate assets (a)	10,935		11,355
Total assets	$	51,437	$	50,710

(a)Corporate assets primarily include cash and cash equivalents, deferred income taxes, assets for the portion of environmental costs that are probable of future recovery and investments held in a separate trust.

NOTE 5 - CONTRACT ASSETS AND LIABILITIES

Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. Contract liabilities include advance payments and billings in excess of revenue recognized. Contract assets and contract liabilities were as follows (in millions):


	March 28, 2021		December 31, 2020
Contract assets	$	10,908	$	9,545
Contract liabilities	7,255		7,545

Contract assets increased $1.4 billion during the quarter ended March 28, 2021, primarily due to the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations during the quarter ended March 28, 2021 for which we have not yet billed our customers. There were no significant credit or impairment losses related to our contract assets during the quarters ended March 28, 2021 and March 29, 2020.

Contract liabilities decreased $290 million during the quarter ended March 28, 2021, primarily due to revenue recognized in excess of payments received on these performance obligations. During the quarter ended March 28, 2021, we recognized $2.3 billion of our contract liabilities at December 31, 2020 as revenue. During the quarter ended March 29, 2020, we recognized $1.6 billion of our contract liabilities at December 31, 2019 as revenue.

NOTE 6 - INVENTORIES

Inventories consisted of the following (in millions):


	March 28, 2021		December 31, 2020
Materials, spares and supplies	$	641	$	612
Work-in-process	2,398		2,693
Finished goods	217		240
Total inventories	$	3,256	$	3,545

Costs incurred to fulfill a contract in advance of the contract being awarded are included in inventories as work-in-process if we determine that those costs relate directly to a contract or to an anticipated contract that we can specifically identify and contract award is probable, the costs generate or enhance resources that will be used in satisfying performance obligations, and the costs are recoverable (referred to as pre-contract costs). Pre-contract costs that are

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

initially capitalized in inventory are generally recognized as cost of sales consistent with the transfer of products and services to the customer upon the receipt of the anticipated contract. All other pre-contract costs, including start-up costs, are expensed as incurred. As of March 28, 2021 and December 31, 2020, $635 million and $583 million of pre-contract costs were included in inventories.

NOTE 7 - POSTRETIREMENT BENEFIT PLANS

Our pretax net periodic benefit income related to our qualified defined benefit pension plans and retiree medical and life insurance plans consisted of the following (in millions):



	Quarters Ended
	March 28, 2021		March 29, 2020
Qualified defined benefit pension plans
Service cost	$	27	$	25
Interest cost	311		385
Expected return on plan assets	(569)		(566)
Recognized net actuarial losses	252		212
Amortization of prior service credits	(87)		(86)
Total net periodic benefit income	$	(66)	$	(30)
Retiree medical and life insurance plans
Service cost	$	3	$	3
Interest cost	13		18
Expected return on plan assets	(35)		(32)
Recognized net actuarial losses	—		(1)
Amortization of prior service costs	9		10
Total net periodic benefit income	$	(10)	$	(2)

We record the service cost component of net periodic benefit income as part of cost of sales and the non-service cost components of net periodic benefit cost as part of other non-operating income, net in the consolidated statements of earnings.

The recognized net actuarial losses and amortization of prior service credits or costs in the table above, along with similar costs related to our other postretirement benefit plans ($4 million for the quarter ended March 28, 2021 and $5 million for the quarter ended March 29, 2020) were reclassified from accumulated other comprehensive loss (AOCL) and recorded as a component of net periodic benefit income for the periods presented. These costs totaled $178 million ($140 million, net of tax) during the quarter ended March 28, 2021, and $140 million ($110 million, net of tax) during the quarter ended March 29, 2020 and were recorded on our consolidated statements of comprehensive income as an increase to other comprehensive income.

The required funding of our qualified defined benefit pension plans is determined in accordance with the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Pension Protection Act of 2006 (PPA), along with consideration of CAS and Internal Revenue Code rules. There were no contributions to our qualified defined benefit pension plans during the quarters ended March 28, 2021 and March 29, 2020.

NOTE 8 - LEGAL PROCEEDINGS AND CONTINGENCIES

We are a party to or have property subject to litigation and other proceedings that arise in the ordinary course of our business, including matters arising under provisions relating to the protection of the environment, and are subject to contingencies related to certain businesses we previously owned. These types of matters could result in fines, penalties, cost reimbursements or contributions, compensatory or treble damages or non-monetary sanctions or relief. We believe the probability is remote that the outcome of each of these matters, including the legal proceedings described below, will have a material adverse effect on the corporation as a whole, notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings in any particular interim reporting period. Among the factors that we consider in this assessment are the nature of existing legal proceedings and claims, the asserted or possible damages or

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Notes to Consolidated Financial Statements (unaudited) (continued)

loss contingency (if estimable), the progress of the case, existing law and precedent, the opinions or views of legal counsel and other advisers, our experience in similar cases and the experience of other companies, the facts available to us at the time of assessment and how we intend to respond to the proceeding or claim. Our assessment of these factors may change over time as individual proceedings or claims progress.

Although we cannot predict the outcome of legal or other proceedings with certainty, where there is at least a reasonable possibility that a loss may have been incurred, GAAP requires us to disclose an estimate of the reasonably possible loss or range of loss or make a statement that such an estimate cannot be made. We follow a thorough process in which we seek to estimate the reasonably possible loss or range of loss, and only if we are unable to make such an estimate do we conclude and disclose that an estimate cannot be made. Accordingly, unless otherwise indicated below in our discussion of legal proceedings, a reasonably possible loss or range of loss associated with any individual legal proceeding cannot be estimated.

Legal Proceedings

United States of America, ex rel. Patzer; Cimma v. Sikorsky Aircraft Corp., et al

As a result of our acquisition of Sikorsky Aircraft Corporation (Sikorsky), we assumed the defense of and any potential liability for two civil False Claims Act lawsuits pending in the U.S. District Court for the Eastern District of Wisconsin. In October 2014, the U.S. Government filed a complaint in intervention in the first suit, which was brought by qui tam relator Mary Patzer, a former Derco Aerospace (Derco) employee. In May 2017, the U.S. Government filed a complaint in intervention in the second suit, which was brought by qui tam relator Peter Cimma, a former Sikorsky Support Services, Inc. (SSSI) employee. In November 2017, the Court consolidated the cases into a single action for discovery and trial.

The U.S. Government alleges that Sikorsky and two of its wholly-owned subsidiaries, Derco and SSSI, violated the civil False Claims Act and the Truth in Negotiations Act in connection with a contract the U.S. Navy awarded to SSSI in June 2006 to support the Navy’s T-34 and T-44 fixed-wing turboprop training aircraft. SSSI subcontracted with Derco, primarily to procure and manage spare parts for the training aircraft. The U.S. Government contends that SSSI overbilled the Navy on the contract as the result of Derco’s use of prohibited cost-plus-percentage-of-cost pricing to add profit and overhead costs as a percentage of the price of the spare parts that Derco procured and then sold to SSSI. The U.S. Government also alleges that Derco’s claims to SSSI, SSSI’s claims to the Navy, and SSSI’s yearly Certificates of Final Indirect Costs from 2006 through 2012 were false and that SSSI submitted inaccurate cost or pricing data in violation of the Truth in Negotiations Act for a sole-sourced, follow-on “bridge” contract. The U.S. Government’s complaints assert common law claims for breach of contract and unjust enrichment.

The U.S. Government further alleged violations of the Anti-Kickback Act and False Claims Act based on a monthly “chargeback,” through which SSSI billed Derco for the cost of certain SSSI personnel, allegedly in exchange for SSSI’s permitting a pricing arrangement that was “highly favorable” to Derco. On January 12, 2018, the Corporation filed a partial motion to dismiss intended to narrow the U.S. Government’s claims, including by seeking dismissal of the Anti-Kickback Act allegations. The Corporation also moved to dismiss Cimma as a party under the False Claims Act’s first-to-file rule, which permits only the first relator to recover in a pending case. The District Court granted these motions, in part, on July 20, 2018, dismissing the Government’s claims under the Anti-Kickback Act and dismissing Cimma as a party to the litigation.

The U.S. Government seeks damages of approximately $52 million, subject to trebling, plus statutory penalties. We believe that we have legal and factual defenses to the U.S. Government’s remaining claims. Although we continue to evaluate our liability and exposure, we do not currently believe that it is probable that we will incur a material loss. If, contrary to our expectations, the U.S. Government prevails in this matter and proves damages at or near $52 million and is successful in having such damages trebled, the outcome could have an adverse effect on our results of operations in the period in which a liability is recognized and on our cash flows for the period in which any damages are paid.

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Notes to Consolidated Financial Statements (unaudited) (continued)

United States of America v. Mission Support Alliance, LLC, et al.

On April 5, 2021, we agreed to settle with the U.S. Department of Justice (DOJ) the previously disclosed lawsuit that the DOJ filed in the U.S. District Court for the Eastern District of Washington on February 8, 2019. The complaint alleged claims under the civil False Claims Act, civil Anti-Kickback Act, and the common law against Mission Support Alliance, LLC (MSA), Lockheed Martin, Lockheed Martin Services, Inc. (LMSI) and a current Lockheed Martin vice president arising out of information technology services performed by LMSI under a subcontract to MSA. MSA is a joint venture that held a prime contract to provide infrastructure support services at the Department of Energy’s (DOE) Hanford facility. The court had previously dismissed the Anti-Kickback Act claim against all defendants with prejudice and denied the motions to dismiss the False Claims Act claims on January 13, 2020. Under the terms of the settlement, the defendants agreed to pay $6 million to resolve the remaining claims. We believe that we have substantial defenses to all of the allegations and have agreed to settle the case to avoid the costs of further litigation of this matter. We are not admitting liability or wrongdoing in settling the matter.

The lawsuit relates to liabilities of our former Information Systems & Global Solutions (IS&GS) business segment that we divested to Leidos Holdings, Inc. (Leidos) on August 16, 2016. As part of the divestiture, Leidos acquired IS&GS’ interest in MSA and the liabilities related to Lockheed Martin’s participation in MSA. Included within the liabilities assumed were those associated with this lawsuit. Lockheed Martin transferred to Leidos a reserve of approximately $38 million established by Lockheed Martin with respect to its potential liability and that of its affiliates and agreed to indemnify Leidos with respect to the liabilities assumed for damages to Leidos for 100% of amounts in excess of this reserve up to $64 million and 50% of amounts in excess of $64 million.

Lockheed Martin v. Metropolitan Transportation Authority

On April 24, 2009, we filed a declaratory judgment action against the New York Metropolitan Transportation Authority and its Capital Construction Company (collectively, the MTA) asking the U.S. District Court for the Southern District of New York to find that the MTA is in material breach of our agreement based on the MTA’s failure to provide access to sites where work must be performed and the customer-furnished equipment necessary to complete the contract. The MTA filed an answer and counterclaim alleging that we breached the contract and subsequently terminated the contract for alleged default. The primary damages sought by the MTA are the costs to complete the contract and potential re-procurement costs. While we are unable to estimate the cost of another contractor to complete the contract and the costs of re-procurement, we note that our contract with the MTA had a total value of $323 million, of which $241 million was paid to us, and that the MTA is seeking damages of approximately $190 million. We dispute the MTA’s allegations and are defending against them. Additionally, following an investigation, our sureties on a performance bond related to this matter, who were represented by independent counsel, concluded that the MTA’s termination of the contract was improper. Finally, our declaratory judgment action was later amended to include claims for monetary damages against the MTA of approximately $95 million. This matter was taken under submission by the District Court in December 2014, after a five-week bench trial and the filing of post-trial pleadings by the parties. We continue to await a decision from the District Court. Although this matter relates to our former IS&GS business, we retained responsibility for the litigation when we divested IS&GS in 2016.

Environmental Matters

We are involved in proceedings and potential proceedings relating to soil, sediment, surface water, and groundwater contamination, disposal of hazardous substances, and other environmental matters at several of our current or former facilities, facilities for which we may have contractual responsibility, and at third-party sites where we have been designated as a potentially responsible party (PRP). A substantial portion of environmental costs will be included in our net sales and cost of sales in future periods pursuant to U.S. Government regulations. At the time a liability is recorded for future environmental costs, we record assets for estimated future recovery considered probable through the pricing of products and services to agencies of the U.S. Government, regardless of the contract form (e.g., cost-reimbursable, fixed-price). We continually evaluate the recoverability of our assets for the portion of environmental costs that are probable of future recovery by assessing, among other factors, U.S. Government regulations, our U.S. Government business base and contract mix, our history of receiving reimbursement of such costs, and efforts by some U.S. Government representatives to limit such reimbursement. We include the portions of those environmental costs expected to be allocated to our non-U.S. Government contracts, or determined not to be recoverable under U.S. Government contracts, in our cost of sales at the time the liability is established.

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Notes to Consolidated Financial Statements (unaudited) (continued)

At March 28, 2021 and December 31, 2020, the aggregate amount of liabilities recorded relative to environmental matters was $778 million and $789 million, most of which are recorded in other noncurrent liabilities on our consolidated balance sheets. We have recorded assets for the portion of environmental costs that are probable of future recovery totaling $675 million and $685 million at March 28, 2021 and December 31, 2020, most of which are recorded in other noncurrent assets on our consolidated balance sheets, for the estimated future recovery of these costs, as we consider the recovery probable based on the factors previously mentioned. We project costs and recovery of costs over approximately 20 years.

Environmental remediation activities usually span many years, which makes estimating liabilities a matter of judgment because of uncertainties with respect to assessing the extent of the contamination as well as such factors as changing remediation technologies and changing regulatory environmental standards. We are monitoring or investigating a number of former and present operating facilities for potential future remediation. We perform quarterly reviews of the status of our environmental remediation sites and the related liabilities and receivables. Additionally, in our quarterly reviews, we consider these and other factors in estimating the timing and amount of any future costs that may be required for remediation activities, and we record a liability when it is probable that a loss has occurred or will occur for a particular site and the loss can be reasonably estimated. The amount of liability recorded is based on our estimate of the costs to be incurred for remediation for that site. We do not discount the recorded liabilities, as the amount and timing of future cash payments are not fixed or cannot be reliably determined. We cannot reasonably determine the extent of our financial exposure in all cases as, although a loss may be probable or reasonably possible, in some cases it is not possible at this time to estimate the reasonably possible loss or range of loss.

We also pursue claims for recovery of costs incurred or for contribution to site remediation costs against other PRPs, including the U.S. Government, and are conducting remediation activities under various consent decrees, orders, and agreements relating to soil, groundwater, sediment, or surface water contamination at certain sites of former or current operations. Under agreements related to certain sites in California, New York, United States Virgin Islands and Washington, the U.S. Government and/or a private party reimburses us an amount equal to a percentage, specific to each site, of expenditures for certain remediation activities in their capacity as PRPs under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).

In addition to the proceedings and potential proceedings discussed above, the California State Water Resources Control Board, a branch of the California Environmental Protection Agency, has indicated it will work to re-establish a maximum level of the contaminant hexavalent chromium in drinking water after a prior standard of 10 parts per billion (ppb) was challenged and withdrawn, and is also reevaluating its existing drinking water standard of 6 ppb for perchlorate. The U.S. Environmental Protection Agency decided in June 2020 not to regulate perchlorate in drinking water at the federal level, although this decision has been challenged, and is considering whether to regulate hexavalent chromium.

If substantially lower standards are adopted for perchlorate (in California) or for hexavalent chromium (in California or at the federal level), we expect a material increase in our estimates for environmental liabilities and the related assets for the portion of the increased costs that are probable of future recovery in the pricing of our products and services for the U.S. Government. The amount that would be allocable to our non-U.S. Government contracts or that is determined not to be recoverable under U.S. Government contracts would be expensed, which may have a material effect on our earnings in any particular interim reporting period.

We also are evaluating the potential impact of existing and contemplated legal requirements addressing a class of compounds known generally as per- and polyfluoroalkyl compounds (PFAS). PFAS compounds have been used ubiquitously, such as in fire-fighting foams, manufacturing processes, and stain- and stick-resistant products (e.g., Teflon, stain-resistant fabrics). Because we have used products and processes over the years containing some of those compounds, they likely exist as contaminants at many of our environmental remediation sites. Governmental authorities have announced plans, and in some instances have begun, to regulate certain of these compounds at extremely low concentrations in drinking water, which could lead to increased cleanup costs at many of our environmental remediation sites.

Letters of Credit, Surety Bonds and Third-Party Guarantees

We have entered into standby letters of credit and surety bonds issued on our behalf by financial institutions, and we have directly issued guarantees to third parties primarily relating to advances received from customers and the guarantee of future performance on certain contracts. Letters of credit and surety bonds generally are available for draw down in the

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Notes to Consolidated Financial Statements (unaudited) (continued)

event we do not perform. In some cases, we may guarantee the contractual performance of third parties such as joint venture partners. We had total outstanding letters of credit, surety bonds and third-party guarantees aggregating $3.3 billion and $3.4 billion at March 28, 2021 and December 31, 2020. Third-party guarantees do not include guarantees issued on behalf of subsidiaries and other consolidated entities.

At March 28, 2021 and December 31, 2020, third-party guarantees totaled $867 million and $871 million, of which approximately 70% and 71% related to guarantees of contractual performance of joint ventures to which we currently are or previously were a party. These amounts represent our estimate of the maximum amounts we would expect to incur upon the contractual non-performance of the joint venture, joint venture partners or divested businesses. Generally, we also have cross-indemnities in place that may enable us to recover amounts that may be paid on behalf of a joint venture partner.

In determining our exposures, we evaluate the reputation, performance on contractual obligations, technical capabilities and credit quality of our current and former joint venture partners and the transferee under novation agreements all of which include a guarantee as required by the FAR. At March 28, 2021 and December 31, 2020, there were no material amounts recorded in our financial statements related to third-party guarantees or novation agreements.

NOTE 9 - FAIR VALUE MEASUREMENTS

Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following (in millions):



	March 28, 2021						December 31, 2020
	Total		Level 1		Level 2		Total		Level 1		Level 2
Assets
Mutual funds	$	1,316	$	1,316	$	—	$	1,335	$	1,335	$	—
U.S. Government securities	98		—		98		92		—		92
Other securities	584		387		197		555		341		214
Derivatives	29		—		29		52		—		52
Liabilities
Derivatives	29		—		29		22		—		22
Assets measured at NAV (a)
Other commingled funds	20						20

(a)Net Asset Value (NAV) is the total value of the fund divided by the number of the fund’s shares outstanding.

Substantially all assets measured at fair value, other than derivatives, represent investments held in a separate trust to fund certain of our non-qualified deferred compensation plans and are recorded in other noncurrent assets on our consolidated balance sheets. The fair values of mutual funds and certain other securities are determined by reference to the quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction costs. The fair values of U.S. Government and other securities are determined using pricing models that use observable inputs (e.g., interest rates and yield curves observable at commonly quoted intervals), bids provided by brokers or dealers or quoted prices of securities with similar characteristics. The fair values of derivative instruments, which consist of foreign currency forward contracts, including embedded derivatives, and interest rate swap contracts, are primarily determined based on the present value of future cash flows using model-derived valuations that use observable inputs such as interest rates, credit spreads and foreign currency exchange rates.

The derivatives outstanding at both March 28, 2021 and December 31, 2020 consist of foreign currency forward contracts, interest rate swaps and foreign currency related contract embedded derivatives. We use derivative instruments principally to reduce our exposure to market risks from changes in foreign currency exchange rates and interest rates. We do not enter into or hold derivative instruments for speculative trading purposes. We transact business globally and are subject to risks associated with changing foreign currency exchange rates. We enter into foreign currency hedges such as forward and option contracts that change in value as foreign currency exchange rates change. Our most significant foreign currency exposures relate to the British pound sterling, the euro, the Canadian dollar and the Australian dollar. These contracts hedge forecasted foreign currency transactions in order to mitigate fluctuations in our earnings and cash flows associated with changes in foreign currency exchange rates. We designate foreign currency hedges as cash flow hedges. We also are exposed to the impact of interest rate changes primarily through our borrowing activities. For fixed

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Notes to Consolidated Financial Statements (unaudited) (continued)

rate borrowings, we may use variable interest rate swaps, effectively converting fixed rate borrowings to variable rate borrowings in order to hedge changes in the fair value of the debt. These swaps are designated as fair value hedges. For variable rate borrowings, we may use fixed interest rate swaps, effectively converting variable rate borrowings to fixed rate borrowings in order to mitigate the impact of interest rate changes on earnings. These swaps are designated as cash flow hedges. We also may enter into derivative instruments that are not designated as hedges and do not qualify for hedge accounting, which are intended to mitigate certain economic exposures.

The aggregate notional amount of our outstanding foreign currency hedges at March 28, 2021 and December 31, 2020 was $3.3 billion and $3.4 billion. The aggregate notional amount of our outstanding interest rate swaps was $672 million and $572 million at March 28, 2021 and December 31, 2020. The fair values of our outstanding foreign currency hedges and interest rate swaps at March 28, 2021 and December 31, 2020 were not significant. Derivative instruments did not have a material impact on net earnings and comprehensive income during the quarters ended March 28, 2021 and March 29, 2020. Substantially all of our derivatives are designated for hedge accounting.

In addition to the financial instruments listed in the table above, we hold other financial instruments, including cash and cash equivalents, receivables, accounts payable and debt. The carrying amounts for cash and cash equivalents, receivables and accounts payable approximated their fair values. The estimated fair value of our outstanding debt was $15.5 billion and $16.9 billion at March 28, 2021 and December 31, 2020. The outstanding principal amount of debt was $13.3 billion at both March 28, 2021 and December 31, 2020, excluding $1.1 billion of unamortized discounts and issuance costs at both March 28, 2021 and December 31, 2020. The estimated fair values of our outstanding debt were determined based on the present value of future cash flows using model-derived valuations that use observable inputs such as interest rates and credit spreads (Level 2).

NOTE 10 - STOCKHOLDERS’ EQUITY

Repurchases of Common Stock

During the quarter ended March 28, 2021, we entered into an accelerated share repurchase (ASR) agreement to repurchase $1.0 billion of our common stock through April 14, 2021. Under the terms of the ASR agreement, we paid $1.0 billion and received an initial delivery of 1.9 million shares of our common stock. Subsequent to our first quarter, upon final settlement of the ASR agreement on April 14, 2021, we received an additional 1.0 million shares of our common stock for no additional consideration based on the average price paid per share of $348.69, calculated with reference to the volume-weighted average price (VWAP) of our common stock over the term of the agreement, less a negotiated discount.

The total remaining authorization for future common share repurchases under our share repurchase program was $2.0 billion as of March 28, 2021. As we repurchase our common shares, we reduce common stock for the $1 of par value of the shares repurchased, with the excess purchase price over par value recorded as a reduction of additional paid-in capital. If additional paid-in capital is reduced to zero, we record the remainder of the excess purchase price over par value as a reduction of retained earnings. During the quarter ended March 28, 2021, we repurchased 1.9 million of our common shares, which were recognized as a reduction to common stock for the par value with the excess purchase price recorded as a reduction of additional paid-in capital of $227 million and $771 million recorded as a reduction to retained earnings. During the quarter ended March 29, 2020, due to the volume of repurchases made under our share repurchase program, additional paid-in capital was reduced to zero, with the remainder of the excess purchase price over par value of $733 million recorded as a reduction to retained earnings.

Dividends

We declared cash dividends totaling $725 million ($2.60 per share) and $677 million ($2.40 per share) during the quarters ended March 28, 2021 and March 29, 2020. Dividends paid during the quarters ended March 28, 2021 and March 29, 2020 are higher than dividends declared due to dividend-equivalents paid to holders of RSUs and PSUs. These dividend-equivalents are accrued during the vesting period and are paid upon the vesting of the RSUs and PSUs which primarily occurs in the first quarter each year.

Restricted Stock Unit Grants

During the quarter ended March 28, 2021, we granted certain employees approximately 0.6 million RSUs with a weighted average grant date fair value of $341.53 per RSU. The grant date fair value of these RSUs is equal to the

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Notes to Consolidated Financial Statements (unaudited) (continued)

closing market price of our common stock on the grant date less a discount to reflect the delay in payment of dividend-equivalent cash payments that are made only upon vesting, which is generally three years from the grant date. We recognize the grant date fair value of RSUs, less estimated forfeitures, as compensation expense ratably over the requisite service period, which is shorter than the vesting period if the employee is retirement eligible on the date of grant or will become retirement eligible before the end of the vesting period.

Accumulated Other Comprehensive Loss

Changes in the balance of AOCL, net of tax, consisted of the following (in millions):



	Postretirement Benefit Plans		Other, net		AOCL
Balance at December 31, 2020	$	(16,155)	$	34	$	(16,121)
Other comprehensive loss before reclassifications	—		(26)		(26)
Amounts reclassified from AOCL
Recognition of net actuarial losses (a)	204		—		204
Amortization of net prior service credits (a)	(64)		—		(64)

Other	—		(1)		(1)
Total reclassified from AOCL	140		(1)		139
Total other comprehensive income (loss)	140		(27)		113
Balance at March 28, 2021	$	(16,015)	$	7	$	(16,008)

Balance at December 31, 2019	$	(15,528)	$	(26)	$	(15,554)
Other comprehensive income before reclassifications	—		5		5
Amounts reclassified from AOCL
Recognition of net actuarial losses (a)	172		—		172
Amortization of net prior service credits (a)	(62)		—		(62)
Other	—		(102)		(102)
Total reclassified from AOCL	110		(102)		8
Total other comprehensive income (loss)	110		(97)		13
Balance at March 29, 2020	$	(15,418)	$	(123)	$	(15,541)

(a)Reclassifications from AOCL related to our postretirement benefit plans were recorded as a component of net periodic benefit income for each period presented (see “Note 7 - Postretirement Benefit Plans”).

NOTE 11 - OTHER

Changes in Estimates

Significant estimates and assumptions are made in estimating contract sales and costs, including the profit booking rate. At the outset of a long-term contract, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract, as well as variable consideration, and assess the effects of those risks on our estimates of sales and total costs to complete the contract. The estimates consider the technical requirements (e.g., a newly-developed product versus a mature product), the schedule and associated tasks (e.g., the number and type of milestone events) and costs (e.g., material, labor, subcontractor, overhead, general and administrative and the estimated costs to fulfill our industrial cooperation agreements, sometimes referred to as offset or localization agreements, required under certain contracts with international customers). The initial profit booking rate of each contract considers risks surrounding the ability to achieve the technical requirements, schedule and costs in the initial estimated total costs to complete the contract. Profit booking rates may increase during the performance of the contract if we successfully retire risks surrounding the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract or may increase the variable consideration we expect to receive on the contract. Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase or our estimates of variable consideration we expect to receive decrease. All of the estimates are subject to change during the performance of the contract and may affect the profit booking rate. When estimates of total costs to be incurred on a contract exceed total

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Notes to Consolidated Financial Statements (unaudited) (continued)

estimates of the transaction price, a provision for the entire loss is determined at the contract level and is recorded in the period in which the loss is determined.

In addition, comparability of our segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on our contracts for which we recognize revenue over time using the percentage-of-completion cost-to-cost method to measure progress towards completion. Increases in the profit booking rates, typically referred to as risk retirements, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes. Segment operating profit and margin may also be impacted favorably or unfavorably by other items, which may or may not impact sales. Favorable items may include the positive resolution of contractual matters, cost recoveries on severance and restructuring charges, insurance recoveries and gains on sales of assets. Unfavorable items may include the adverse resolution of contractual matters; restructuring charges, except for significant severance actions, which are excluded from segment operating results; reserves for disputes; certain asset impairments; and losses on sales of certain assets.

Our consolidated net adjustments not related to volume, including net profit booking rate adjustments and other matters, increased segment operating profit by approximately $495 million and $465 million during the quarters ended March 28, 2021 and March 29, 2020. These adjustments increased net earnings by approximately $391 million ($1.40 per share) and $367 million ($1.30 per share) during the quarters ended March 28, 2021 and March 29, 2020. We recognized net sales from performance obligations satisfied in prior periods of approximately $492 million and $530 million during the quarters ended March 28, 2021 and March 29, 2020, which primarily relate to changes in profit booking rates that impacted revenue.

As previously disclosed in our 2020 Form 10-K, we are responsible for a program to design, develop and construct a ground-based radar at our RMS business segment. The program has experienced performance issues for which we have periodically accrued reserves. As of March 28, 2021, cumulative losses remained at approximately $250 million on this program. We may continue to experience issues related to customer requirements and our performance under this contract and have to record additional charges. However, based on the losses previously recorded and our current estimate of the sales and costs to complete the program, at this time we do not anticipate that additional losses, if any, would be material to our operating results or financial condition.

As previously disclosed in our 2020 Form 10-K, we have a program, EADGE-T, to design, integrate, and install an air missile defense command, control, communications, computers - intelligence (C4I) system for an international customer that has experienced performance issues and for which we have periodically accrued reserves at our RMS business segment. As of March 28, 2021, cumulative losses remained at approximately $260 million. We continue to monitor program requirements and our performance. At this time, we do not anticipate additional charges that would be material to our operating results or financial condition.

As previously disclosed in our 2020 Form 10-K, we are responsible for designing, developing and installing an upgraded turret for the Warrior Capability Sustainment Program (“WCSP”). On March 22, 2021 we received a notification from our customer that it has made a decision to not proceed with the WCSP demonstration and manufacturing phases of the program, and we were directed to suspend work on the program. We are evaluating the financial impact of this decision. At this time, we do not anticipate additional charges that would be material to our operating results or financial condition. As of March 28, 2021, cumulative losses remained at approximately $140 million on this program.

Backlog

Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. Our backlog includes both funded (firm orders for our products and services for which funding has been both authorized and appropriated by the customer) and unfunded (firm orders for which funding has not been appropriated) amounts. We do not include unexercised options or potential orders under indefinite-delivery, indefinite-quantity agreements in our backlog. For our cost-reimbursable and fixed-priced-incentive contracts, the estimated consideration we expect to receive pursuant to the terms of the contract may exceed the contractual award amount. The estimated consideration is determined at the outset of the contract and is continuously reviewed throughout the contract period. In determining the estimated consideration, we consider the risks related to the technical, schedule and cost impacts to complete the contract and an estimate of any variable consideration.

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Notes to Consolidated Financial Statements (unaudited) (continued)

Periodically, we review these risks and may increase or decrease backlog accordingly. As the risks on such contracts are successfully retired, the estimated consideration from customers may be reduced, resulting in a reduction of backlog without a corresponding recognition of sales. As of March 28, 2021, our ending backlog was $147.4 billion. We expect to recognize approximately 39% of our backlog over the next 12 months and approximately 61% over the next 24 months as revenue with the remainder recognized thereafter.

Lockheed Martin Ventures Fund

Through our Lockheed Martin Ventures Fund, we make strategic investments in certain early stage companies that we believe are advancing or developing new technologies applicable to our business. These investments may be in the form of common or preferred stock, convertible debt securities or investments in funds. Most of the investments are in equity securities without readily determinable fair values, which are measured initially at cost and are then adjusted to fair value only if there is an observable price change or reduced for impairment, if applicable. Investments with quoted market prices in active markets are recorded at fair value at the end of each reporting period. The carrying amounts of investments held in our Lockheed Martin Venture Fund were $243 million and $173 million at March 28, 2021 and December 31, 2020. During the quarter ended March 28, 2021, we recorded $68 million ($51 million, or $0.18 per share, after-tax) of unrealized gains in other non-operating income, net in our consolidated statements of earnings for changes in fair value.

Income Taxes

Our effective income tax rate was 16.9% and 15.4% for the quarters ended March 28, 2021 and March 29, 2020.

The rate for the first quarter of 2021 is higher due to decreased tax deductions for employee equity awards compared to the first quarter of 2020. The rates for both periods benefited from tax deductions for foreign derived intangible income, the research and development tax credit, and dividends paid to the corporation's defined contribution plans with an employee stock ownership plan feature.

On March 11, 2021, the President signed the American Rescue Plan Act of 2021 into law which contained funding relief provisions affecting single-employer pension plans. We do not expect to make a pension contribution in 2021 as previously planned. The decision not to make the planned pension contribution had an immaterial impact on our income tax expense and effective tax rate for the quarter ended March 28, 2021. The American Rescue Plan Act also contains other provisions that do not have a material impact on our income tax expense and effective tax rate.

Severance and Restructuring Charges

During the quarter ended March 28, 2021, we recorded severance and restructuring charges of $36 million ($28 million, or $0.10 per share, after-tax). As previously announced, the severance and restructuring charges are to close and consolidate certain facilities and reduce total workforce within our RMS business segment. The actions are being taken to better align RMS' organization and cost structure to improve the efficiency of its operations and affordability of its products and services. Upon separation, terminated employees receive lump-sum severance payments primarily based on years of service, the majority of which are expected to be paid over the next several quarters.

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Lockheed Martin Corporation

Notes to Consolidated Financial Statements (unaudited) (continued)

NOTE 12 - RECENT ACCOUNTING PRONOUNCEMENTS

In 2017, the United Kingdom’s Financial Conduct Authority (FCA) announced that after 2021 it would no longer compel banks to submit the rates required to calculate the London Interbank Offered Rate (LIBOR) and other interbank offered rates, which have been widely used as reference rates for various securities and financial contracts, including loans, debt and derivatives. This announcement indicates that the continuation of LIBOR on the current basis is not guaranteed after 2021. Subsequently in March 2021, the FCA announced some USD LIBOR tenors (overnight, 1 month, 3 month, 6 month and 12 month) will continue to be published until June 30, 2023. Regulators in the U.S. and other jurisdictions have been working to replace these rates with alternative reference interest rates that are supported by transactions in liquid and observable markets, such as the Secured Overnight Financing Rate (SOFR). Currently, our credit facility and certain of our derivative instruments reference LIBOR-based rates. The discontinuation of LIBOR will require these arrangements to be modified in order to replace LIBOR with an alternative reference interest rate. Our credit facility includes a provision for the determination of a successor LIBOR rate; and we have adhered to the ISDA 2020 IBOR Fallbacks Protocol, which will govern our derivatives upon the final cessation of USD LIBOR. ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, as amended, helps limit the accounting impact from contract modifications, including hedging relationships, due to the transition from LIBOR to alternative reference rates that are completed by December 31, 2022. We do not expect a significant impact to our operating results, financial position or cash flows from the transition from LIBOR to alternative reference interest rates, but we will continue to monitor the impact of this transition until it is completed.

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Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Lockheed Martin Corporation

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of Lockheed Martin Corporation (the Corporation) as of March 28, 2021, the related consolidated statements of earnings, comprehensive income, cash flows and equity for the quarters ended March 28, 2021 and March 29, 2020, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Corporation as of December 31, 2020, the related consolidated statements of earnings, comprehensive income, cash flows and equity for the year then ended, and the related notes (not presented herein); and in our report dated January 28, 2021, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Corporation’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Ernst & Young LLP

Tysons, Virginia

April 21, 2021

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

BUSINESS OVERVIEW

We are a global security and aerospace company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. We also provide a broad range of management, engineering, technical, scientific, logistics, system integration and cybersecurity services. We serve both U.S. and international customers with products and services that have defense, civil and commercial applications, with our principal customers being agencies of the U.S. Government. During the quarter ended March 28, 2021, 72% of our $16.3 billion in net sales were from the U.S. Government, either as a prime contractor or as a subcontractor (including 62% from the Department of Defense (DoD)), 27% 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.

COVID-19

The COVID-19 pandemic continues to present significant business challenges in 2021. During the first quarter of 2021, we continued to experience impacts in each of our business areas related to COVID-19, primarily in continued increased coronavirus-related costs, delays in supplier deliveries, impacts of travel restrictions, site access and quarantine restrictions, and the impacts of remote work and adjusted work schedules. During the first quarter, we continued to take measures to protect the health and safety of our employees, including measures to facilitate the provision of vaccines to our employees in line with state and local guidelines. We also continued to work with our customers and suppliers to minimize disruptions, including using accelerated progress payments from the U.S. Government plus cash on hand to accelerate $1.4 billion of payments to our suppliers during the first quarter of 2021 that are due by their terms in future periods.

Although the COVID-19 pandemic did not have a significant impact on our financial results in the first quarter of 2021, the ultimate 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, including the duration of the pandemic, any potential subsequent waves of COVID-19 infection, the effectiveness, distribution and acceptance of COVID-19 vaccines, 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 are also difficult to predict but could negatively affect our future results and business operations. For additional risks to the corporation related to the COVID-19 pandemic, see Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Form 10-K).

2021 Financial Outlook

We expect our 2021 net sales to increase in the mid-single digit range from 2020 levels. The projected growth in net sales from 2020 is driven by F-35, F-16 and classified programs at Aeronautics, increased volume within integrated air and missile defense programs at MFC, increased volume on Sikorsky helicopter program and training and logistics solutions programs at RMS, and hypersonics volume (including the acquisition of Integration Innovation Inc.’s (i3) hypersonics portfolio) at Space. Total business segment operating profit margin in 2021 is expected to be approximately 11.0%; and we have increased cash from operations to greater than or equal to $8.9 billion, with no discretionary pension contribution.

Our 2021 outlook reflects the UK Ministry of Defense’s intent to re-nationalize the Atomic Weapons Establishment program (AWE program) on June 30, 2021. It does not incorporate the pending acquisition of Aerojet Rocketdyne Holdings, Inc. The outlook for 2021 assumes continued support and funding of our programs, known impacts of COVID-19, and a statutory tax rate of 21%. Our 2021 outlook also reflects the impact of the first quarter 2021 unrealized gains from investments held by the Lockheed Martin Ventures Fund, but does not include any future gains or losses related to market volatility and changes in valuations of our investment holdings. Additionally, it assumes that there will not be significant reductions in customer budgets, changes in funding priorities and that the U.S. Government will not operate under a continuing resolution for an extended period in which new contract and program starts are restricted.

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On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (ARPA), which eased funding rules for single-employer defined benefit pension plans by extending the amortization of funding shortfalls and enhancing interest rate stabilization, among many other stimulus measures. Plan sponsors can spread (amortize) contributions required to pay for plan underfunding. ARPA lowers the minimum required contributions by “restarting” and extending the amortization period from seven to fifteen years. ARPA also adjusts and extends the pension funding interest rate relief from prior legislation that was to begin phasing out. The legislation effectively stabilizes (or raises) interest rates used to calculate required funding contributions and provides temporary funding relief due to the historically low interest rate environment. We also use the stabilized interest rates to determine our CAS pension costs. Plan sponsors can adopt the legislation as of 2020, 2021, or 2022. We will adopt the funding amortization change as of 2020 and the interest rate stabilization as of 2022. The lower pension contributions will be partially offset by lower tax deductions. We are currently analyzing the impacts to the business areas but expect the legislation will result in lower sales, increased segment operating profit, reduced FAS / CAS adjustment and net income, and improved cash flow in future years than if the legislation had not been enacted.

Changes in circumstances may require us to revise our assumptions, which could materially change our current estimate of 2021 net sales, operating margin and cash flows.

The following discussion is a supplement to and should be read in conjunction with the accompanying consolidated financial statements and notes thereto and with our 2020 Form 10-K.

INDUSTRY CONSIDERATIONS

U.S. Government Funding

The U.S. Government is operating with a full year appropriation which provided $741 billion in discretionary funding for national defense (includes Department of Defense (DoD) funding and defense-related spending in energy and water development, homeland security, and military construction appropriations), of which $672 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 funds for the final two years (FY 2020 and FY 2021) of the Budget Control Act of 2011 (BCA).

On March 11, 2021, the President signed the American Rescue Plan Act of 2021 into law. The legislation provides additional relief to address the continued impact of COVID-19 on the economy, public health, state and local governments, individuals, and businesses. The legislation also contains funding relief provisions affecting single-employer pension plans (see further discussion in “Financial Condition” below). Additionally, it extends Section 3610 of the CARES Act through September 2021, which gives the 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.

On April 9, 2021, the President released his initial discretionary funding request for FY 2022. The document outlines the Biden administration’s discretionary funding priorities, including the discretionary topline requests for the DOD and other agencies. The request includes $715 billion in discretionary funding for the DoD. The proposed funding level for the DoD is approximately $11 billion above the enacted amount for FY 2021. The President’s full budget release is expected later this spring and will include his full agenda of investments, spending, and revenues.

See also the discussion of U.S. Government funding risks within “Item 1A, Risk Factors” included in our 2020 Form 10-K.

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CONSOLIDATED RESULTS OF OPERATIONS

Our operating cycle is primarily long-term and involves many types of contracts for the design, development and manufacture of products and related activities with varying delivery schedules. Consequently, the results of operations of a particular period, or period-to-period comparisons of sales and profits, may not be indicative of future operating results. The following discussions of comparative results among periods should be reviewed in this context. All per share amounts cited in these discussions are presented on a “per diluted share” basis, unless otherwise noted. Our consolidated results of operations were as follows (in millions, except per share data):



	Quarters Ended
		March 28, 2021			March 29, 2020
Net sales			$	16,258		$	15,651
Cost of sales			(14,072)			(13,560)
Gross profit			2,186			2,091
Other (expense) income, net			(4)			31
Operating profit			2,182			2,122
Interest expense			(140)			(148)
Other non-operating income, net			169			56
Earnings before income taxes			2,211			2,030
Income tax expense			(374)			(313)


Net earnings			$	1,837		$	1,717
Diluted earnings per common share			$	6.56		$	6.08

Certain amounts reported in other (expense) income, net, primarily our share of earnings or losses from equity method investees, are included in the operating profit of our business segments. Accordingly, such amounts are included in the discussion of our business segment results of operations.

Net Sales

We generate sales from the delivery of products and services to our customers. Our consolidated net sales were as follows (in millions):


	Quarters Ended
		March 28, 2021			March 29, 2020
Products		$	13,753		$	13,166
% of total net sales		84.6		%	84.1		%
Services		2,505			2,485
% of total net sales		15.4		%	15.9		%
Total net sales		$	16,258		$	15,651

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.

Product Sales

Product sales increased $587 million, or 4%, during the quarter ended March 28, 2021 compared to the same period in 2020. The increase in product sales was primarily due to higher product sales of approximately $315 million at RMS, $135 million at MFC and $115 million at Space. The increase in product sales at RMS was primarily due to higher net sales for training and logistics solutions programs due to the delivery of an international pilot training system, and higher

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volume for Sikorsky helicopter programs (primarily VH-92A, CH-53K, and Combat Rescue Helicopter (CRH) production contracts). These increases in product sales at RMS were partially offset by decreases for various C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to lower volume; and for integrated warfare systems and sensors (IWSS) programs due to lower volume on the Littoral Combat Ship (LCS) program and the TPQ-53 program, that was partially offset by higher volume on the Canadian Surface Combatant and Aegis Combat System (Aegis) program. The increase in product sales at MFC was primarily due to increased volume for integrated air and missile defense programs (primarily Patriot Advanced Capability-3 (PAC-3)), and tactical and strike missile programs (primarily Army Tactical Missile System (ATACMS), Joint Air-to-Surface Standoff Missile (JASSM), and Long Range Anti-Ship Missile (LRASM)); partially offset by decreased volume for sensors and global sustainment programs (primarily Low Altitude Navigation and Targeting Infrared for Night (LANTIRN®) and Sniper Advanced Targeting Pod (SNIPER®)). The increase in product sales at Space was primarily due to higher volume for the AWE program, National Security Space programs (primarily Next Generation Overhead Persistent Infrared (Next Gen OPIR)) and Commercial Civil Space programs (primarily Space Transportation programs).

Service Sales

Service sales increased $20 million, or 1%, during the quarter ended March 28, 2021 compared to the same period in 2020. The increase in service sales was primarily due to higher sales of approximately $45 million at RMS, partially offset by lower sales of $15 million at Space.

Cost of Sales

Cost of sales, for both products and services, consist of materials, labor, subcontracting costs and an allocation of indirect costs (overhead and general and administrative), as well as the costs to fulfill our industrial cooperation agreements, sometimes referred to as offset agreements, required under certain contracts with international customers. For each of our contracts, we monitor the nature and amount of costs at the contract level, which form the basis for estimating our total costs to complete the contract. Our consolidated cost of sales were as follows (in millions):



	Quarters Ended
		March 28, 2021				March 29, 2020
Cost of sales – products			$	(12,281)			$	(11,742)
% of product sales			89.3		%		89.2		%
Cost of sales – services			(2,230)				(2,213)
% of service sales			89.0		%		89.1		%
Severance and restructuring charges			(36)				—
Other unallocated, net			475				395
Total cost of sales			$	(14,072)			$	(13,560)

The following discussion of material changes in our consolidated cost of sales for products and services should be read in tandem with the preceding discussion of changes in our consolidated net sales and our business segment results of operations. Except for potential impacts to our programs resulting from COVID-19, we have not identified any additional developing trends in cost of sales for products and services that would have a material impact on our future operations (see “Other Matters” discussion below for further discussion).

Product Costs

Product costs increased $539 million, or 5%, during the quarter ended March 28, 2021 compared to the same period in 2020. The increase in product costs was primarily due to higher product costs of approximately $270 million at RMS, $135 million at Space and $130 million at MFC. The increase in product costs at RMS was primarily due to training and logistics solutions programs because of the delivery of an international pilot training system program and higher volume for Sikorsky helicopter programs (VH-92A, CH-53K and CRH). These increases in products costs at RMS were partially offset by decreases for IWSS programs due to lower volume on the LCS and TPQ-53 programs and charges on a ground-based radar program in the first quarter of 2020 that did not recur in the first quarter of 2021; and for various C6ISR programs due to lower volume. The increase in product costs at Space was primarily due to AWE program as higher sales volume was more than offset by accelerated and incremental amortization expense for intangible assets due to the U.K. Ministry of Defense’s plan to renationalize the program on June 30, 2021; and National Security Space programs

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(primarily Next Gen OPIR). The increase in product costs at MFC was primarily due to increased volume for integrated air and missile defense programs (primarily PAC-3) and tactical and strike missile programs (primarily JASSM and LRASM).

Service Costs

Service costs increased $17 million, or 1%, during the quarter ended March 28, 2021 compared to the same period in 2020. The increase in service costs was primarily due to higher service costs of approximately $35 million at RMS, partially offset by lower service costs of approximately $10 million at Space.

Severance and Restructuring Charges

Other Unallocated, Net

Other unallocated, net primarily includes the FAS/CAS operating adjustment (which represents the difference between cost accounting standards (CAS) pension cost recorded in our business segment’s results of operations and the service cost component of FAS pension income), stock-based compensation expense and other corporate costs. These items are not allocated to the business segments and, therefore, are not allocated to cost of sales for products or services. Other unallocated, net reduced cost of sales by $475 million during the quarter ended March 28, 2021, compared to $395 million during the quarter ended March 29, 2020. Other unallocated, net during the quarter ended March 28, 2021 was higher primarily due to lower market declines that reduced the fair market value of certain investment assets during the quarter ended March 28, 2021 compared to the quarter ended March 29, 2020 and fluctuations in costs associated with various corporate items, none of which were individually significant.

Other (expense) Income, Net

Other expense, net during the quarter ended March 28, 2021, was $4 million, compared to other income, net of $31 million during the quarter ended March 29, 2020. Other expense, net during the quarter ended March 29, 2020, included lower earnings generated by equity method investees.

Other Non-operating Income, Net

Other non-operating income, net primarily includes the non-service cost components of FAS pension and other postretirement benefit plan expense (i.e., interest cost, expected return on plan assets, net actuarial gains or losses, amortization of prior service cost or credits), and changes in fair value using the measurement alternative on equity investments. During the quarter ended March 28, 2021, other non-operating income, net was $169 million, compared to $56 million during the quarter ended March 29, 2020. The increase during the quarter ended March 28, 2021 was primarily due to unrealized gains from investments held in our Lockheed Martin Ventures Fund and an increase in non-service FAS pension income for our qualified defined benefit pension plans.

Income Tax Expense

Our effective income tax rate was 16.9% and 15.4% for the quarters ended March 28, 2021 and March 29, 2020.

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Changes in U.S. (federal or state) or foreign tax laws and regulations, or their interpretation and application, including those with retroactive effect, including the amortization for research or experimental expenditures, could significantly impact our provision for income taxes, the amount of taxes payable, our deferred tax asset and liability balances, and stockholders’ equity. Recent proposals to increase the U.S. corporate income tax rate would require us to increase our net deferred tax assets upon enactment of new tax legislation, with a corresponding material, one-time, non-cash decrease in income tax expense, but our income tax expense and payments would be materially increased in subsequent years. Our net deferred tax assets were $3.4 billion and $3.5 billion at March 28, 2021 and December 31, 2020, based on a 21% federal statutory income tax rate, and primarily relate to our postretirement benefit plans. If legislation increasing the federal statutory income tax rate to 28% had been enacted at March 28, 2021, our net deferred tax assets would have been increased by $1.1 billion and we would have recorded a corresponding one-time, non-cash increase in income tax benefit of $1.1 billion. The amount of net deferred tax assets will change periodically based on several factors, including the measurement of our postretirement benefit plan obligations and actual cash contributions to our postretirement benefit plans.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures currently and requires taxpayers to amortize them over five years. While it is possible that Congress may modify or repeal this provision before it takes effect and we continue to have ongoing discussions with members of Congress, both on our own and with other industries through coalitions, we have no assurance that these provisions will be modified or repealed. Furthermore, we are continuing to work with our advisors to refine our legal interpretation of this provision prior to implementation in 2022. If these provisions are not repealed and based on current interpretations of the law, initially this would materially decrease our cash from operations based on current assumptions in 2022 by approximately $2.0 billion; and increase our net deferred tax assets by a similar amount. The largest impact would be on 2022 cash from operations, which would depend on the amount of research and development expenses paid or incurred in 2022 and other factors. The impact, however, would continue over the five year amortization period but would decrease over the period and be immaterial in year six. The amount of net deferred tax assets will change periodically based on several factors, including the measurement of our postretirement benefit plan obligations, actual cash contributions to our postretirement benefit plans, and future changes in tax laws. In addition, we are regularly under audit or examination by tax authorities, including foreign tax authorities (including in, amongst others, Australia, Canada, India, Italy, Japan, Poland, and the United Kingdom). 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.

Net Earnings

We reported net earnings of $1.8 billion ($6.56 per share) during the quarter ended March 28, 2021, compared to $1.7 billion ($6.08 per share) during the quarter ended March 29, 2020. Both net earnings and earnings per share were affected by the factors mentioned above. Earnings per share also benefited from a net decrease of approximately 1.6 million shares outstanding from March 29, 2020 to March 28, 2021 as a result of share repurchases, partially offset by share issuance under our stock-based awards and certain defined contribution plans.

BUSINESS SEGMENT RESULTS OF OPERATIONS

We operate in four business segments: Aeronautics, MFC, RMS and Space. We organize our business segments based on the nature of products and services offered.

Excluded items are included in the reconciling item “Unallocated items” between operating profit from our business segments and our consolidated operating profit. See “Note 11 - Other” included in our Notes to Consolidated Financial

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Statements for a discussion related to certain factors that may impact the comparability of net sales and operating profit of our business segments.

Summary operating results for each of our business segments were as follows (in millions):



	Quarters Ended
		March 28, 2021			March 29, 2020
Net sales
Aeronautics			$	6,387		$	6,369
Missiles and Fire Control			2,749			2,619
Rotary and Mission Systems			4,107			3,746
Space			3,015			2,917
Total net sales			$	16,258		$	15,651
Operating profit
Aeronautics			$	693		$	672
Missiles and Fire Control			396			396
Rotary and Mission Systems			433			376
Space			227			281
Total business segment operating profit			1,749			1,725
Unallocated items
FAS/CAS operating adjustment			489			469
Stock-based compensation			(47)			(42)

Severance and restructuring charges			(36)			—
Other, net			27			(30)
Total unallocated items			433			397
Total consolidated operating profit			$	2,182		$	2,122

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	Quarters Ended
	March 28, 2021		March 29, 2020
Total FAS income and CAS costs
FAS pension income	$	66	$	30
Less: CAS pension cost	516		494
Net FAS/CAS pension adjustment	$	582	$	524

Service and non-service cost reconciliation
FAS pension service cost	$	(27)	$	(25)
Less: CAS pension cost	516		494
FAS/CAS operating adjustment	489		469
Non-operating FAS pension income	93		55
Net FAS/CAS pension adjustment	$	582	$	524

Management evaluates performance on our contracts by focusing on net sales and operating profit and not by type or amount of operating expense. Consequently, our discussion of business segment performance focuses on net sales and operating profit, consistent with our approach for managing the business. This approach is consistent throughout the life cycle of our contracts, as management assesses the bidding of each contract by focusing on net sales and operating profit and monitors performance on our contracts in a similar manner through their completion.

We regularly provide customers with reports of our costs as the contract progresses. The cost information in the reports is accumulated in a manner specified by the requirements of each contract. For example, cost data provided to a customer for a product would typically align to the subcomponents of that product (such as a wing-box on an aircraft) and for services would align to the type of work being performed (such as aircraft sustainment). Our contracts generally allow for the recovery of costs in the pricing of our products and services. Most of our contracts are bid and negotiated with our customers under circumstances in which we are required to disclose our estimated total costs to provide the product or service. This approach for negotiating contracts with our U.S. Government customers generally allows for recovery of our actual costs plus a reasonable profit margin. We also may enter into long-term supply contracts for certain materials or components to coincide with the production schedule of certain products and to ensure their availability at known unit prices.

Many of our contracts span several years and include highly complex technical requirements. At the outset of a contract, we identify and monitor risks to the achievement of the technical, schedule and cost aspects of the contract and assess the effects of those risks on our estimates of total costs to complete the contract. The estimates consider the technical requirements (e.g., a newly-developed product versus a mature product), the schedule and associated tasks (e.g., the number and type of milestone events) and costs (e.g., material, labor, subcontractor, overhead and the estimated costs to fulfill our industrial cooperation agreements, sometimes referred to as offset agreements, required under certain contracts with international customers). The initial profit booking rate of each contract considers risks surrounding the ability to achieve the technical requirements, schedule and costs in the initial estimated total costs to complete the contract. Profit booking rates may increase during the performance of the contract if we successfully retire risks related to the technical, schedule and cost aspects of the contract, which decreases the estimated total costs to complete the contract. Conversely, our profit booking rates may decrease if the estimated total costs to complete the contract increase. All of the estimates are subject to change during the performance of the contract and may affect the profit booking rate.

We have a number of programs that are designated as classified by the U.S. Government which cannot be specifically described. The operating results of these classified programs are included in our consolidated and business segment results and are subjected to the same oversight and internal controls as our other programs.

Our net sales are primarily derived from long-term contracts for products and services provided to the U.S. Government as well as FMS contracted through the U.S. Government. We recognize revenue as performance obligations

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are satisfied and the customer obtains control of the products and services. For performance obligations to deliver products with continuous transfer of control to the customer, revenue is recognized based on the extent of progress towards completion of the performance obligation, generally using the percentage-of-completion cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer as we incur costs on our contracts. For performance obligations in which control does not continuously transfer to the customer, we recognize revenue at the point in time in which each performance obligation is fully satisfied.

Changes in net sales and operating profit generally are expressed in terms of volume. Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract.

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Aeronautics

Summary operating results for our Aeronautics business segment were as follows (in millions):



	Quarters Ended
		March 28, 2021				March 29, 2020
Net sales			$	6,387			$	6,369
Operating profit			693				672
Operating margin			10.9		%		10.6		%

Aeronautics’ net sales during the quarter ended March 28, 2021 were comparable with the same period in 2020. Net sales increased by approximately $135 million on classified contracts due to higher volume and about $20 million for the F-16 program due to increased volume on production contracts that was partially offset by decreased volume on sustainment contracts. These increases were offset by lower net sales of approximately $65 million for the F-35 program primarily due to the inception-to-date effect of reducing the profit booking rate on a development contract and to a lesser extent lower volume on development and production contracts; and about $65 million for the F-22 program due to decreased volume on sustainment contracts.

Aeronautics’ operating profit during the quarter ended March 28, 2021 increased $21 million, or 3%, compared to the same period in 2020. Operating profit increased approximately $15 million for the F-16 program due to higher risk retirements on sustainment contracts and increased volume on production contracts; and about $10 million for the F-35 program due to higher risk retirements on production contracts that were mostly offset by the inception-to-date effect of reducing the profit booking rate to eliminate fees on a development contract and to a lesser extent lower volume on development and production contracts. Adjustments not related to volume, including net profit booking rate adjustments, were $25 million higher in the first quarter of 2021 compared to the same period in 2020.

We continue to expect Aeronautics’ 2021 net sales to increase in the mid-single digit percentage range from 2020 levels driven by increased volume on F-35, F-16 and classified programs. Operating profit is expected to increase in the mid-to-high single digit percentage range above 2020 levels. Operating profit margin for 2021 is expected to be slightly higher than 2020 levels.

Missiles and Fire Control

Summary operating results for our MFC business segment were as follows (in millions):


	Quarters Ended
		March 28, 2021				March 29, 2020
Net sales			$	2,749			$	2,619
Operating profit			396				396
Operating margin			14.4		%		15.1		%

MFC’s net sales during the quarter ended March 28, 2021 increased $130 million, or 5%, compared to the same period in 2020. The increase was primarily attributable to higher net sales of approximately $120 million for integrated air and missile defense programs due to increased volume (primarily Patriot Advanced Capability-3 (PAC-3)) and about $50 million for tactical and strike missile programs due to higher volume (ATACMS, JASSM, and LRASM). These increases were partially offset by a decrease of approximately $40 million for sensors and global sustainment programs due to decreased volume (primarily LANTIRN and SNIPER).

MFC’s operating profit during the quarter ended March 28, 2021 was comparable to the same period in 2020. Operating profit increased approximately $30 million for integrated air and missile defense programs due to higher risk retirements and increased volume (primarily PAC-3) and about $10 million for tactical and strike missile programs due to higher volume (primarily JASSM and LRASM). These increases were offset by a decrease of approximately $40 million for sensors and global sustainment programs due to lower risk retirements and decreased volume (primarily LANTIRN and SNIPER). Adjustments not related to volume, including net profit booking rate adjustments, were $15 million lower in the first quarter of 2021 compared to the same period in 2020.

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We continue to expect MFC’s 2021 net sales to increase in the mid-single digit percentage range from 2020 levels driven by higher volume in the integrated air and missile defense business, primarily PAC-3. Operating profit is expected to increase in the mid-single digit percentage range above 2020 levels. Operating profit margin for 2021 is expected to be slightly lower than 2020 levels.

Rotary and Mission Systems

Summary operating results for our RMS business segment were as follows (in millions):


	Quarters Ended
		March 28, 2021				March 29, 2020
Net sales			$	4,107			$	3,746
Operating profit			433				376
Operating margin			10.5		%		10.0		%

RMS’ net sales during the quarter ended March 28, 2021 increased $361 million, or 10%, compared to the same period in 2020. The increase was attributable to higher net sales of $290 million for training and logistics solutions programs primarily due to the delivery of an international pilot training system and about $170 million for Sikorsky helicopter programs due to higher volume on production contracts (primarily VH-92A, CH-53K, and CRH). These increases were partially offset by decreases of about $80 million for various C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to lower volume; and about $25 million for integrated warfare systems and sensors programs due to lower volume on the LCS and TPQ-53 programs that was partially offset by higher volume on the Canadian Surface Combatant and Aegis program.

RMS’ operating profit during the quarter ended March 28, 2021 increased $57 million, or 15%, compared to the same period in 2020. Operating profit increased approximately $25 million for integrated warfare systems and sensors programs due to higher risk retirements (primarily Aegis) and charges on a ground-based radar program in the first quarter of 2020 that did not recur in the first quarter of 2021 that were partially offset by lower risk retirements on LCS, about $20 million for training and logistics solutions programs due to the delivery of an international pilot training system and higher risk retirements, and about $15 million for Sikorsky helicopter programs due to increased volume (primarily VH-92A, CH-53K, and CRH). Adjustments not related to volume, including net profit booking rate adjustments, were $25 million higher in the first quarter of 2021 compared to the same period in 2020.

We currently expect RMS’ 2021 net sales to increase in the low-to-mid-single digit percentage range from 2020 levels driven by higher volume on Sikorsky helicopter programs and TLS programs. Operating profit is expected to increase in the mid-single digit percentage range above 2020 levels. Operating profit margin for 2021 is expected to be in line with 2020 levels.

Space

Summary operating results for our Space business segment were as follows (in millions):


	Quarters Ended
		March 28, 2021				March 29, 2020
Net sales			$	3,015			$	2,917
Operating profit			227				281
Operating margin			7.5		%		9.6		%

Space’s net sales during the quarter ended March 28, 2021 increased $98 million, or 3%, compared to the same period in 2020. The increase was primarily attributable to higher net sales of approximately $60 million for the AWE program due to higher volume; and about $20 million for Commercial Civil Space programs due to higher volume (primarily Space Transportation programs).

Space’s operating profit during the quarter ended March 28, 2021 decreased $54 million, or 19%, compared to the same period in 2020. Operating profit decreased approximately $35 million for National Security Space programs primarily due to lower risk retirements (primarily Advanced Extremely High Frequency (AEHF)); about $35 million due to lower equity earnings from the corporation's investment in United Launch Alliance (ULA); and approximately $10 million for the

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AWE program as higher sales volume was more than offset by accelerated and incremental amortization expense for intangible assets due to the U.K. Ministry of Defense's plan to renationalize the program on June 30, 2021. These decreases were partially offset by an increase of approximately $30 million for Commercial Civil Space programs due to higher risk retirements and higher volume (primarily Space Transportation programs). Adjustments not related to volume, including net profit booking rate adjustments, were comparable in the first quarter of 2021 to the same period in 2020.

Total equity (losses)/earnings (primarily ULA) recognized in Space's operating profit were approximately $(5) million, or (2)% of Space’s operating profit during the quarter ended March 28, 2021, compared to approximately $30 million, or 11% during the quarter ended March 29, 2020.

We continue to expect Space’s 2021 net sales to increase in the low-single digit percentage range from 2020 levels driven by higher volume on hypersonics programs and on government satellite programs (primarily Next Gen OPIR), partially offset by lower volume at AWE due to the UK Ministry of Defense’s intent to re-nationalize the program on June 30, 2021. Operating profit is expected to decrease in the low-single digit percentage range from 2020 levels. Operating profit margin for 2021 is expected to be lower than 2020 levels.

FINANCIAL CONDITION

Liquidity and Cash Flows

As of March 28, 2021, we had a cash balance of $2.9 billion and no borrowings outstanding under our $2.5 billion revolving credit facility (the credit facility), which is also available for borrowings in the event of a lack of short-term commercial paper availability. To date, the effects of COVID-19 have not had a significant negative impact on our liquidity, cash flows or capital resources. Since the pandemic began, Lockheed Martin has remained committed to flowing down the benefits received inception-to-date from the U.S. Government’s modification of progress payment rate to our supply chain partners. Through the first quarter of 2021, the company has received approximately $1.3 billion of net accelerated progress payments, the majority of which were in 2020. We used the accelerated progress payments from the U.S. Government plus cash on hand to accelerate $1.4 billion of payments to our suppliers during the first quarter of 2021 that are due by their terms in future periods.

The CARES Act provides a deferral of payroll tax payments from which we benefited by deferring cash outlays of $460 million in 2020. This will have the effect of increasing cash outlays for payroll taxes during fourth quarter of 2021 and 2022. On March 11, 2021, the President signed the American Rescue Plan Act of 2021 into law. The legislation provides additional relief to address the continued impact of COVID-19 on the economy, public health, state and local governments, individuals, and businesses. It extends Section 3610 of the CARES Act through September 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. We continue to refine the effect of the CARES Act and ongoing government guidance related to COVID-19 that may be issued.

We have a balanced cash deployment strategy to enhance stockholder value and position ourselves to take advantage of new business opportunities when they arise. Consistent with that strategy, we have continued to invest in our business, including capital expenditures, independent research and development, and selective business acquisitions and investments; returned cash to stockholders through dividends and share repurchases; and actively managed our debt levels and maturities, interest rates, and pension obligations.

We expect to continue to look for opportunities to manage our pension liabilities through the purchase of group annuity contracts for portions of our outstanding defined benefit pension obligations using assets from the pension trust. Future transactions could result in us making additional contributions to the pension trust and significant non-cash settlement charges to earnings in the applicable reporting period.

We have generated strong operating cash flows, which have been the primary source of funding for our operations, capital expenditures, debt service and repayments, dividends, share repurchases and postretirement benefit plan contributions. The total remaining authorization for future common share repurchases under our share repurchase program was $2.0 billion as of March 28, 2021.

Currently, we expect our cash from operations will continue to be sufficient to support our operations and anticipated capital expenditures for the foreseeable future. We also have access to credit markets, if needed, for liquidity or general corporate purposes, and letters of credit to support customer advance payments and for other trade finance purposes

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such as guaranteeing our performance on particular contracts. See our “Capital Resources” section below for a discussion on financial resources available to us.

On December 20, 2020, we entered into an agreement to acquire Aerojet Rocketdyne Holdings, Inc. for $51.00 per share, which is net of a $5.00 per share special cash dividend Aerojet Rocketdyne paid to its stockholders on March 24, 2021. This represents a post-dividend equity value of approximately $4.6 billion, on a fully diluted as-converted basis, and a transaction value of approximately $4.4 billion after the assumption of Aerojet Rocketdyne’s projected net cash. The transaction is expected to close in the later part of 2021, subject to receipt of regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and satisfaction of other closing conditions specified in the acquisition agreement. We expect to finance the acquisition through a combination of cash on hand and new debt issuances.

On March 11, 2021, the President signed the American Rescue Plan Act of 2021 into law. This legislation contained funding relief provisions affecting single-employer pension plans. The legislation is expected to reduce CAS pension cost and lower ERISA cash funding requirements as compared to current pension estimates. As a result, the company’s current outlook was updated to assume no pension contribution in 2021 (previously assumed a $1.0 billion discretionary payment). In addition, the company decided to adopt the CAS changes effective in 2022.

The following table provides a summary of our cash flow information followed by a discussion of the key elements (in millions):


	Quarters Ended
	March 28, 2021		March 29, 2020
Cash and cash equivalents at beginning of year	$	3,160	$	1,514
Operating activities
Net earnings	1,837		1,717
Non-cash adjustments	419		343
Changes in working capital	(577)		475
Other, net	69		(221)
Net cash provided by operating activities	1,748		2,314
Net cash used for investing activities	(169)		(295)
Net cash used for financing activities	(1,806)		(1,545)
Net change in cash and cash equivalents	(227)		474
Cash and cash equivalents at end of period	$	2,933	$	1,988

Operating Activities

Net cash provided by operating activities decreased $566 million during the quarter ended March 28, 2021 compared to the same period in 2020. The decrease was primarily due to a higher use of cash related to working capital, partially offset by an increase in net earnings. The $1.1 billion decrease in cash flows related to working capital (defined as receivables, contract assets, and inventories less accounts payable and contract liabilities) was primarily attributable to timing of cash payments for accounts payable (primarily due to accelerating $1.4 billion of payments to our suppliers during the first quarter of 2021 that are due by their terms in future periods compared to $50 million in the first quarter of 2020) and timing of production and billing cycles affecting contract assets and contract liabilities (primarily the TLS program at RMS), partially offset by liquidation of inventories (primarily TLS programs at RMS).

Investing Activities

Net cash used for investing activities decreased $126 million during the quarter ended March 28, 2021 compared to the same period in 2020, primarily due to cash proceeds in the first quarter of 2021 from the sale of our ownership interest in Advanced Military Maintenance, Repair and Overhaul Center (AMMROC) which was completed in the fourth quarter of 2020. Capital expenditures totaled $281 million and $293 million during the quarters ended March 28, 2021 and March 29, 2020. The majority of our capital expenditures were for equipment and facilities infrastructure that generally are incurred to support new and existing programs across all of our business segments. We also incur capital expenditures for information technology to support programs and general enterprise information technology infrastructure, inclusive of costs for the development or purchase of internal-use software.

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Financing Activities

Net cash used for financing activities was $1.8 billion during the quarter ended March 28, 2021, compared to $1.5 billion during the same period in 2020. Net cash used for financing activities during the quarters ended March 28, 2021 was primarily driven by dividend payments and share repurchases.

During the quarters ended March 28, 2021 and March 29, 2020, we paid dividends totaling $739 million ($2.60 per share) and $693 million ($2.40 per share). In addition, we repurchased 1.9 million shares of our common stock during the quarter ended March 28, 2021 for $1.0 billion pursuant to the accelerated share repurchase (ASR) agreement. The actual number of shares delivered under the ASR is based on an average volume-weighted average price (VWAP) over the plan period and, based on the average VWAP as of April 14, 2020, we received an additional 1.0 million shares upon final settlement. During the quarter ended March 29, 2020, we purchased 1.7 million shares of our common stock for $756 million, which included $500 million paid pursuant to the ASR.

Capital Resources

At March 28, 2021, we held cash and cash equivalents of $2.9 billion that was generally available to fund ordinary business operations without significant legal, regulatory, or other restrictions.

At March 28, 2021, we also had a $2.5 billion revolving credit facility with various banks that is available for general corporate purposes with an expiration date of August 24, 2024. The undrawn portion of the credit facility also serves as a backup facility for the issuance of commercial paper. The total amount outstanding at any point in time under the combination of our commercial paper program and the credit facility cannot exceed the amount of the credit facility. We may request and the banks may grant, at their discretion, an increase in the borrowing capacity under the credit facility of up to an additional $500 million. There were no borrowings outstanding under the credit facility at March 28, 2021.

We have agreements in place with financial institutions to provide for the issuance of commercial paper. The outstanding balance of commercial paper can fluctuate daily and the amount outstanding during the period may be greater than or less than the amount reported at the end of the period. There were no commercial paper borrowings outstanding as of March 28, 2021 and December 31, 2020. We may, as conditions warrant, from time to time issue commercial paper backed by our credit facility to manage the timing of cash flows. However, as described under Item 1A, Risk Factors of our 2020 Form 10-K, depending on market conditions, commercial paper may not be available on favorable terms or at all.

Our outstanding debt, net of unamortized discounts and issuance costs was $12.2 billion as of March 28, 2021 and is in the form of publicly-issued notes that bear interest at fixed rates. As of March 28, 2021, we had $506 million of borrowings scheduled to mature in the next twelve months with the remainder of our debt due from 2023 to 2052. As of March 28, 2021, we were in compliance with all covenants contained in our debt and credit agreements. There were no material changes during the quarter ended March 28, 2021 to our contractual commitments as presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2020 Form 10-K that were outside the ordinary course of our business.

Our total equity was $6.3 billion at March 28, 2021, an increase of $295 million from December 31, 2020. The increase was primarily attributable to net earnings of $1.8 billion and amortization of $140 million in pension and other postretirement benefit plan expense. These increases were partially offset by dividends declared of $725 million and repurchasing common stock under our ASR program for $1.0 billion.

OTHER MATTERS

Status of the F-35 Program

The F-35 program primarily consists of production contracts, sustainment activities, and new development efforts. Production of the aircraft is expected to continue for many years given the U.S. Government’s current inventory objective of 2,456 aircraft for the U.S. Air Force, U.S. Marine Corps, and U.S. Navy; commitments from our seven international partner countries and six international customers; as well as expressions of interest from other countries.

During the first quarter of 2021, we delivered 17 production aircraft to our U.S. and international partner countries, resulting in total deliveries of 628 production aircraft, and we have 339 production aircraft in backlog, including orders from our international partner countries.

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In response to COVID-19 F-35 supplier delays and in conjunction with the F-35 Joint Program Office, we tapered our production rate in 2020. In 2021, we expect the production rate to improve from its 2020 levels but continue to be impacted by COVID-19. See the discussion in Business Overview - COVID-19.

Given the size and complexity of the F-35 program, we anticipate that there will be continual reviews related to aircraft performance, program schedule, cost, and requirements as part of the DoD, Congressional, and international partner countries’ oversight and budgeting processes. Current program challenges include, but are not limited to supplier and partner performance, software development, receiving funding for contracts on a timely basis, the level of cost associated with life cycle operations, sustainment and warranties, and executing future flight tests and supporting the resulting findings from testing and operating the aircraft.

Contingencies

See “Note 8 - Legal Proceedings and Contingencies” included in our Notes to Consolidated Financial Statements for information regarding our contingent obligations, including off-balance sheet arrangements.

Critical Accounting Policies

There have been no significant changes to the critical accounting policies disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Form 10-K. However, as set forth below, we have updated our disclosures related to our postretirement benefit plans to describe changes to our funding requirements and the amount of pension costs recoverable under contracts with the U.S. Government as a result of the American Rescue Plan Act of 2021.

Postretirement Benefit Plans

On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (ARPA), which eased funding requirements for single-employer defined benefit pension plans under the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Pension Protection Act of 2006 (PPA) by restarting and extending the amortization of funding shortfalls and extending and enhancing interest rate stabilization percentages, among many other stimulus measures. Plan sponsors can spread (amortize) contributions required to pay for plan underfunding over time. ARPA “restarts” and extends the amortization period from seven to fifteen years. ARPA also adjusts and extends the pension funding interest rate relief from prior legislation. Under previous interest rate stabilization measures, the interest rates must be within 10% of 25-year interest rate averages as determined by the IRS. Under prior law, stabilized interest rates were to begin phasing out in 2021, with the 10% corridor around the 25-year interest rate averages expanding five percentage points each year until the corridor bounded interest rates were within 30% of the 25-year averages, which was expected to occur in 2024. Under ARPA, the 10% interest rate corridor was reduced to 5% until 2026, at which point the corridor will expand by five percentage points each year until interest rates are within 30% in 2030. Additionally, a 5% floor was established for the 25-year interest rate averages. These changes have the effect of lowering our minimum funding requirements. We also use the stabilized interest rates to determine our CAS pension costs, which are also expected to be lower from what they otherwise would have been had the interest rate stabilization measures not been adjusted and extended. Plan sponsors generally can adopt these changes as of 2020, 2021, or 2022. We will adopt the funding amortization change as of 2020 and the interest rate stabilization as of 2022. The changes in law will not affect the discount rate used to calculate our FAS pension obligation under GAAP.

Our 2021 financial outlook was updated to assume no pension contribution in 2021 as compared to the previously assumed $1.0 billion discretionary payment. There is no change to the FAS/CAS pension outlook for 2021. Accordingly, we continue to expect to recover approximately $2.1 billion of CAS pension costs on our contracts in 2021. We also continue to expect FAS pension income of $265 million in 2021 and a net 2021 FAS/CAS pension benefit of $2.3 billion. We are assessing the impacts for periods beyond 2021.

Goodwill and Intangible Assets

The carrying value of our Sikorsky reporting unit included goodwill of $2.7 billion as of March 28, 2021. In the fourth quarter of 2020, we performed our annual impairment test for goodwill, and the results of that test indicated no impairment existed. As of the date of our 2020 annual impairment test, we estimated that the fair value of our Sikorsky reporting unit exceeded its carrying value for goodwill by a margin of approximately 30%.

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The fair value of our Sikorsky reporting unit can be significantly impacted by changes in expected future orders, general market pressures, including U.S. Government budgetary constraints, discount rates, long term growth rates, and changes in U.S. (federal or state) or foreign tax laws and regulations, or their interpretation and application, including those with retroactive effect, along with other significant judgments. Based on our assessment of these circumstances, we have determined that goodwill at our Sikorsky reporting unit is at risk for impairment should there be a deterioration of projected cash flows of the reporting unit.

We do not currently anticipate any material impairments on our assets as a result of COVID-19. See Item 1A, Risk Factors of our 2020 Form 10-K for a discussion of the potential impacts of COVID-19 on the fair value of our assets.

Recent Accounting Pronouncements

See Note 1 - Basis of Presentation and “Note 12 - Recent Accounting Pronouncements” included in our Notes to Consolidated Financial Statements for information related to new accounting standards.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

As disclosed in “Item 7A, Quantitative and Qualitative Disclosures About Market Risk” of our 2020 Form 10-K, we transact business globally and are subject to risks associated with changing foreign currency exchange rates. We enter into foreign currency hedges such as forward and option contracts that change in value as foreign currency exchange rates change. Our exposures to market risk have not changed materially since December 31, 2020. See “Note 9 - Fair Value Measurements” included in our Notes to Consolidated Financial Statements for additional discussion.

ITEM 4. Controls and Procedures

We performed an evaluation of the effectiveness of our disclosure controls and procedures as of March 28, 2021. The evaluation was performed with the participation of senior management of each business segment and key corporate functions, under the supervision of the Chief Executive Officer (CEO) and Chief Financial Officer (CFO). Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were operating and effective as of March 28, 2021.

There were no changes in our internal control over financial reporting during the quarter ended March 28, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Forward-Looking Statements

This Form 10-Q contains statements that, to the extent they are not recitations of historical fact, constitute forward-looking statements within the meaning of the federal securities laws, and are based on our current expectations and assumptions. The words “believe,” “estimate,” “anticipate,” “project,” “intend,” “expect,” “plan,” “outlook,” “scheduled,” “forecast” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially due to factors such as:

•the impact of COVID-19 or future epidemics on our business, including potential supply chain disruptions, facility closures, work stoppages, program delays, payment policies and regulations and our ability to recover our costs under contracts;

•budget uncertainty, the risk of future budget cuts, and changing funding and acquisition priorities;

•our reliance on contracts with the U.S. Government, which are dependent on U.S. Government funding and can be terminated for convenience, and our ability to negotiate favorable contract terms;

•risks related to the development, production, sustainment, performance, schedule, cost and requirements of complex and technologically advanced programs including our largest, the F-35 program;

•planned production rates and orders for significant programs; compliance with stringent performance and reliability standards; materials availability;

•performance and financial viability of key suppliers, teammates, joint ventures and partners, subcontractors and customers;

•economic, industry, business and political conditions including their effects on governmental policy and government actions that disrupt our supply chain or prevent the sale or delivery of our products (such as delays in approvals for exports requiring Congressional notification);

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•trade policies or sanctions (including potential Chinese sanctions on us or our suppliers, teammates or partners; U.S. Government sanctions on Turkey and its removal from the F-35 program and potential U.S. Government actions to restrict sales to the Kingdom of Saudi Arabia and the United Arab Emirates);

•our success expanding into and doing business in adjacent markets and internationally and the differing risks posed by international sales;

•changes in foreign national priorities and foreign government budgets and planned orders;

•the competitive environment for our products and services, including increased pricing pressures, aggressive pricing in the absence of cost realism evaluation criteria, competition from outside the aerospace and defense industry, and bid protests;

•the timing and customer acceptance of product deliveries;

•our ability to develop new technologies and products, including emerging digital and network technologies and capabilities;

•our ability to attract and retain a highly skilled workforce; the impact of work stoppages or other labor disruptions;

•cyber or other security threats or other disruptions faced by us or our suppliers;

•our ability to implement and continue, and the timing and impact of, capitalization changes such as share repurchases and dividend payments;

•our ability to recover costs under U.S. Government contracts and changes in contract mix;

•the accuracy of our estimates and projections;

•timing and estimates regarding pension funding and movements in interest rates and other changes that may affect pension plan assumptions, stockholders’ equity, the level of the FAS/CAS adjustment and actual returns on pension plan assets and the impact of the American Rescue Plan Act of 2021;

•the successful operation of joint ventures that we do not control;

•realizing the anticipated benefits of acquisitions or divestitures, investments, joint ventures, teaming arrangements or internal reorganizations, and market volatility in the fair value of investments in our Lockheed Martin Ventures Fund that are marked to market;

•risks related to our proposed acquisition of Aerojet Rocketdyne, including the failure to obtain, delays in obtaining or adverse conditions contained in any required regulatory approvals and our ability to successfully and timely integrate the business and realize synergies and other expected benefits of the transaction;

•our efforts to increase the efficiency of our operations and improve the affordability of our products and services;

•the risk of an impairment of our assets, including the potential impairment of goodwill recorded as a result of the acquisition of the Sikorsky business;

•the availability and adequacy of our insurance and indemnities;

•our ability to benefit fully from or adequately protect our intellectual property rights;

•procurement and other regulations and policies affecting our industry, export of our products, cost allowability or recovery, preferred contract type, and performance and progress payments policy, including a reversal or modification to the DoD’s increase to the progress payment rate in response to COVID-19;

•changes in accounting, taxation, export or other laws, regulations, and policies and their interpretation or application; and

•the outcome of legal proceedings, bid protests, environmental remediation efforts, audits, government investigations or government allegations that we have failed to comply with law, other contingencies and U.S. Government identification of deficiencies in our business systems.

These are only some of the factors that may affect the forward-looking statements contained in this Form 10-Q. For a discussion identifying additional important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, see our filings with the U.S. Securities and Exchange Commission (SEC) including, but not limited to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and subsequent Quarterly Reports on Form 10-Q. Our filings may be accessed through the Investor Relations page of our website, www.lockheedmartin.com/investor, or through the website maintained by the SEC at www.sec.gov.

Our actual financial results likely will be different from those projected due to the inherent nature of projections. Given these uncertainties, forward-looking statements should not be relied on in making investment decisions. The forward-looking statements contained in this Form 10-Q speak only as of the date of its filing. Except where required by applicable law, we expressly disclaim a duty to provide updates to forward-looking statements after the date of this Form 10-Q to reflect subsequent events, changed circumstances, changes in expectations, or the estimates and assumptions associated with them. The forward-looking statements in this Form 10-Q are intended to be subject to the safe harbor protection provided by the federal securities laws.

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PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

We are a party to or have property subject to litigation and other proceedings that arise in the ordinary course of our business, including matters arising under provisions relating to the protection of the environment, and are subject to contingencies related to certain businesses we previously owned. These types of matters could result in fines, penalties, cost reimbursements or contributions, compensatory or treble damages or non-monetary sanctions or relief. We believe the probability is remote that the outcome of each of these matters will have a material adverse effect on the corporation as a whole, notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings in any particular interim reporting period. We cannot predict the outcome of legal or other proceedings with certainty. These matters include the proceedings summarized in “Note 8 - Legal Proceedings and Contingencies” included in our Notes to Consolidated Financial Statements and “Note 15 – Legal Proceedings, Commitments and Contingencies” in our Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Form 10-K) filed with the U.S. Securities and Exchange Commission.

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 “Note 8 - Legal Proceedings and Contingencies” included in our Notes to Consolidated Financial Statements. See also “Critical Accounting Policies – Environmental Matters” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 15 – Legal Proceedings, Commitments and Contingencies”, each in our 2020 Form 10-K, for a description of previously reported matters.

As a U.S. Government contractor, we are subject to various audits and investigations by the U.S. Government to determine whether our operations are being conducted in accordance with applicable regulatory requirements. U.S. Government investigations of us, whether relating to government contracts or conducted for other reasons, could result in administrative, civil or criminal liabilities, including repayments, fines or penalties being imposed upon us, suspension, proposed debarment, debarment from eligibility for future U.S. Government contracting or suspension of export privileges. Suspension or debarment could have a material adverse effect on us because of our dependence on contracts with the U.S. Government. U.S. Government investigations often take years to complete and many result in no adverse action against us. We also provide products and services to customers outside of the U.S., which are subject to U.S. and foreign laws and regulations and foreign procurement policies and practices. Our compliance with local regulations or applicable U.S. Government regulations also may be audited or investigated.

ITEM 1A. Risk Factors

There have been no material changes to the risk factors disclosed in “Item 1A, Risk Factors” of our 2020 Form 10-K. These risks and uncertainties have the potential to materially affect our business, results of operations, financial condition, cash flows, projected results and future prospects. These risks are not exclusive and additional risks to which we are subject include the factors mentioned under “Forward-Looking Statements” and the risks described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q.

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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no sales of unregistered equity securities during the quarter ended March 28, 2021.

The following table provides information about our repurchases of our common stock that is registered pursuant to Section 12 of the Securities Exchange Act of 1934 during the quarter ended March 28, 2021.



Period (a)	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)	Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (b)
					(in millions)
January 1, 2021 – January 31, 2021	—	$	—	—	$	3,011
February 1, 2021 – February 28, 2021(c)	2,062,737	$	340.45	1,851,680	$	2,011
March 1, 2021 – March 28, 2021	220	$	330.25	—	$	2,011
Total(c)(d)	2,062,957	$	340.43	1,851,680

(a)We close our books and records on the last Sunday of each month to align our financial closing with our business processes, except for the month of December, as our fiscal year ends on December 31. As a result, our fiscal months often differ from the calendar months. For example, March 28, 2021 was the last day of our March 2021 fiscal month.

(b)In October 2010, our Board of Directors approved a share repurchase program pursuant to which we are authorized to repurchase our common stock in privately negotiated transactions or in the open market at prices per share not exceeding the then-current market prices. From time to time, our Board of Directors authorizes increases to our share repurchase program. The total remaining authorization for future common share repurchases under our share repurchase program was $2.0 billion as of March 28, 2021. Under the program, management has discretion to determine the dollar amount of shares to be repurchased and the timing of any repurchases in compliance with applicable law and regulation. This includes purchases pursuant to Rule 10b5-1 plans, including accelerated share repurchases. The program does not have an expiration date.

(c)During the quarter ended March 28, 2021, we entered into an accelerated share repurchase (ASR) agreement to repurchase $1.0 billion of our common stock through April 14, 2021. Under the terms of the ASR agreement, we paid $1.0 billion and received an initial delivery of 1,851,680 shares of our common stock. Subsequent to our first quarter, upon final settlement of the ASR agreement on April 14, 2021, we received an additional 1,016,194 shares of our common stock for no additional consideration based on the average price paid per share of $348.69, calculated with reference to the volume-weighted average price (VWAP) of our common stock over the term of the agreement, less a negotiated discount. See “Note 10 - Stockholders’ Equity” included in our Notes to Consolidated Financial Statements. Average Price Paid Per Share above does not include ASR shares.

(d)During the quarter ended March 28, 2021, the total number of shares purchased included 211,277 shares that were transferred to us by employees in satisfaction of tax withholding obligations associated with the vesting of restricted stock units and performance stock units. These purchases were made pursuant to a separate authorization by our Board of Directors and are not included within the program.

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ITEM 6. Exhibits


Exhibit No.						Description

10.1						Form of 2021 Annual Restricted Stock Unit Award Agreement under the Lockheed Martin Corporation 2020 Incentive Performance Award Plan

10.2						Form of Performance Stock Unit Award Agreement (2021 - 2023 Performance Period) under the Lockheed Martin Corporation 2020 Incentive Performance Award Plan

10.3						Form of Long Term Incentive Performance Award Agreement (2021 - 2023 Performance Period) under the Lockheed Martin Corporation 2020 Incentive Performance Award Plan

10.4						Amendment to Outstanding Long-Term Incentive Performance and Performance Stock Unit Award Agreements (effective February 24, 2021)

10.5						Transition Agreement dated January 28, 2021 between Marillyn A. Hewson and Lockheed Martin Corporation (incorporated by reference to Exhibit 10.1 to Lockheed Martin Corporation’s Current Report on Form 8-K filed with the SEC on January 29, 2021)

10.6						Lockheed Martin Corporation 2021 Management Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to Lockheed Martin Corporation’s Current Report on Form 8-K filed with the SEC on February 26, 2021)

15						Acknowledgment of Independent Registered Public Accounting Firm

31.1						Certification of James D. Taiclet pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of Kenneth R. Possenriede pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32						Certification of James D. Taiclet and Kenneth R. Possenriede pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document contained in Exhibit 101

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						Lockheed Martin Corporation
						(Registrant)

Date: April 21, 2021						By: /s/ Brian P. Colan
						Brian P. Colan
						Vice President and Controller
						(Duly Authorized Officer and Chief Accounting Officer)

Document

Exhibit 10.1

Award Date: February 25, 2021

RESTRICTED STOCK UNIT AWARD AGREEMENT (ANNUAL)

GRANTED UNDER THE LOCKHEED MARTIN CORPORATION

2020 INCENTIVE PERFORMANCE AWARD PLAN

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING

SECURITIES THAT HAVE BEEN REGISTERED UNDER THE

SECURITIES ACT OF 1933

This Award Agreement applies to the Restricted Stock Units (“RSUs”) granted by Lockheed Martin Corporation to you as of the Award Date (defined above) under the Lockheed Martin Corporation 2020 Incentive Performance Award Plan (“Plan”). The term Restricted Stock Unit or RSU as used in this Award Agreement refers only to the Restricted Stock Units awarded to you under this Award Agreement. References to the “Corporation” include Lockheed Martin Corporation and its Subsidiaries.

Each RSU entitles you, upon satisfaction of the continuous employment and other requirements set forth in this Award Agreement and the Plan, to receive from the Corporation: (i) one (1) share of the Corporation’s common stock, par value $1.00 per share (“Stock”); and (ii) a cash payment equal to the sum of any cash dividends paid to stockholders of the Corporation during the Restricted Period (as defined below), each in accordance with the terms of this Award Agreement, the Plan, and any rules and procedures adopted by the Management Development and Compensation Committee (“Committee”) of the Board of Directors.

This Award Agreement sets forth some of the terms and conditions of your Award under the Plan, as determined by the Committee. Additional terms and conditions, including tax information, are contained in the Plan and in the Prospectus relating to the Plan of which the Plan and this Award Agreement are a part. In the event of a conflict between this Award Agreement and the Plan, the Plan document will control. The number of RSUs applicable to your Award are set forth in the electronic stock plan award recordkeeping system (“Stock Plan System”) maintained by the Corporation or its designee at http://www.stockplanconnect.com. The Prospectus is also available at this website.

Except as described in Section 9, your Award is not effective or enforceable until you properly acknowledge your acceptance of the Award by completing the electronic receipt on the Stock Plan System as soon as possible but in no event later than May 31, 2021 (the “Acceptance Deadline”). Except as described in Section 9, if you do not properly acknowledge your acceptance of this Award Agreement on or before the Acceptance Deadline, this Award will be forfeited.

Award Date: February 25, 2021

Page 2

Assuming prompt and proper acknowledgement of your acceptance of this Award Agreement as described above and in Section 9, this Award will be effective as of the Award Date. Acceptance of this Award Agreement constitutes your consent to any action taken under the Plan consistent with its terms with respect to this Award and your agreement to be bound by the restrictions contained in Section 9 and Exhibit A (“Post-Employment Conduct Agreement”) and Exhibit B (“Stock Ownership Requirements”), as amended from time to time.

1. CONSIDERATION FOR AWARD

The consideration for the RSUs is your continued service to the Corporation as an Employee during the Restricted Period set forth below. If you do not continue to perform services for the Corporation as an Employee during the entire Restricted Period as set forth below under “RESTRICTED PERIOD, FORFEITURE,” your Award will be forfeited in whole or in part.

2. RIGHTS OF OWNERSHIP, RESTRICTIONS ON TRANSFER

During the Restricted Period, your RSUs will be subject to forfeiture. Until the Restricted Period ends with respect to a particular RSU and a share of Stock is delivered to you, you generally will not have the rights and privileges of a stockholder. In particular, you will not have the right to vote your RSUs on any matter put to the stockholders of the Corporation; you may not sell, transfer, assign, pledge, use as collateral or otherwise dispose of or encumber RSUs; and you will not have the right to receive any dividends paid to stockholders or dividend equivalents on the RSUs.

Upon expiration or termination of the Restricted Period with respect to your RSUs, and subject to the forfeiture provisions set forth below, each RSU for which the restrictions have lapsed will be exchanged for a certificate (either in paper or book entry form) evidencing one (1) share of Stock issued in your name and a cash amount equal to the dividends that would have been paid to you had you owned such share from the Award Date until the expiration or termination of the Restricted Period (“Deferred Dividend Equivalents” or “DDEs”). Your shares and the cash payment for the DDEs will be delivered to you as soon as practicable, but not later than sixty (60) days after the expiration or termination of the Restricted Period, and in no event later than the March 15 following the expiration or termination of such Restricted Period (or, for taxpayers in Canada or as otherwise required by local country law, in no event later than the December 31 following the expiration or termination of such Restricted Period).

The certificates delivered to you may contain any legend the Corporation determines is appropriate under the securities laws.

You are responsible for payment of all Taxes imposed on you as a result of the Award. The Corporation will comply with all applicable U.S. Tax withholding requirements applicable to the RSUs, the DDEs, and associated Stock. Please see the Prospectus for the Plan for a discussion of certain material U.S. Tax consequences of the Award. Any withholding Tax on shares of Stock (and associated DDEs) deliverable to you will be satisfied by means of the Corporation’s reducing the number of shares of Stock (and associated DDEs) deliverable to you in respect of a vested Award. If you are an Insider at the time of income tax withholding, the Corporation will base withholding on the highest individual tax rate. If you are not an Insider at the time of income tax withholding, the Corporation will base withholding on the highest

Award Date: February 25, 2021

Page 3

individual tax rate, unless you elect otherwise in accordance with procedures established by the Corporation during an election window that may be offered by the Corporation. If you elect a lower tax rate for withholding, then you may owe additional taxes as a result of the payment of the Award.

If any Tax withholding is required with respect to any Award (including with respect to associated DDEs) during the Restricted Period, the Corporation generally shall reduce the Award by the number of shares of Stock and/or the amount of associated DDEs with a value equal to the Tax withholding obligation and such shares of Stock and/or DDEs will be used to satisfy the Tax withholding obligation.

The Corporation shall also have the right to (i) offset any other obligation of the Corporation to you (including but not limited to by withholding from your salary) by an amount sufficient to satisfy the Tax withholding obligation, or (ii) require you (or your estate) to pay the Corporation an amount equal to the Tax withholding obligation.

If you are a taxpayer in a country other than the U.S., you agree to make appropriate arrangements with the Corporation or its subsidiaries for the satisfaction of all income and employment tax withholding requirements, as well as social insurance contributions applicable to the RSUs, the DDEs, and associated Stock. Please see the tax summary for your country on the Stock Plan System at http://www.stockplanconnect.com. If you are a taxpayer in a country other than the U.S., you represent that you will consult with your own tax advisors in connection with this Award and that you are not relying on the Corporation for any tax advice.

If a payment under this Award constitutes nonqualified deferred compensation under Section 409A of the Code, no payment due upon termination of employment shall be made unless the termination of employment is a “separation from service” as defined in Section 409A of the Code and accompanying regulations. In the event Code section 409A(a)(2)(B)(i) applies because you are a specified employee receiving a distribution on account of a termination of employment, delivery of Stock and the DDEs may be delayed for six months from such date. Similarly, if you are an Insider subject to the reporting provisions of Section 16(a) of the Securities Exchange Act of 1934 (“Exchange Act”), delivery of Stock following the expiration of the Restricted Period for any reason may be delayed for six months. For example, if the delivery of the Stock would result in a nonexempt short-swing transaction under Section 16(b) of the Exchange Act, delivery will be delayed until the earliest date upon which the delivery either would not result in a nonexempt short-swing transaction or would otherwise not result in liability under Section 16(b) of the Exchange Act.

After the Stock is delivered to you, you will enjoy all of the rights and privileges associated with ownership of the shares, including the right to vote on any matter put to stockholder vote, to receive dividends, and to encumber, sell or otherwise transfer the shares. You should note, however, that, while the shares would thus be free of the restrictions imposed during the Restricted Period, your ability to sell or pledge the shares may be limited under the federal securities laws or corporate policy.

In the event of your death, the Stock and cash payment for the DDEs in respect of your RSUs will be transferred to your Beneficiary (as defined in the Plan).

Award Date: February 25, 2021

Page 4

3. RESTRICTED PERIOD, FORFEITURE

Except as otherwise provided in Section 4 below or as required to satisfy a Tax withholding obligation as provided in Section 2 above, all of your RSUs will be forfeited and all of your rights to the RSUs and to receive Stock for your RSUs and to receive cash payment for the DDEs will cease without further obligation on the part of the Corporation unless (i) except as described in Section 9, you personally accept this Award Agreement as provided in Section 9 by the Acceptance Deadline, and (ii) you provide services to the Corporation as an Employee of the Corporation throughout the entire Restricted Period. The Restricted Period begins on the Award Date and terminates on February 25, 2024 (the “Vesting Date”), subject only to the specific exceptions provided below.

4. DEATH, DISABILITY, LAYOFF, RETIREMENT

(a) Death and Disability

Your RSUs and the DDEs will immediately vest and no longer be subject to the continuing employment requirement if:

(i) you die while still employed by the Corporation; or

(ii) you terminate employment as a result of your total disability. Your employment will be treated as terminating because of a total disability on the date you commence receiving a benefit under the Corporation’s long-term disability plan in which you participate (or, if you are not enrolled in the Corporation’s long-term disability plan, on the date on which long-term disability benefits would have commenced under the plan under which you would have been covered, had you enrolled, using the standards set forth in that plan).

The vested RSUs will be exchanged for shares of Stock, and the DDEs will be paid in cash as soon as practicable, but no later than sixty (60) days after the date of your termination of employment, on account of death or total disability, and in no event later than the March 15 next following the year in which such termination occurs (or, for taxpayers in Canada or as otherwise required by local country law, in no event later than the December 31 following such termination).

Except as otherwise determined by the Corporation in its discretion in accordance with Section 9, in the event that you die and have not properly acknowledged acceptance of the Award prior to your death (or by the Acceptance Deadline, whichever comes first), you will forfeit all of your RSUs granted hereunder and all of your rights to the RSUs and to receive Stock for your RSUs and the DDEs will cease without further obligation on the part of the Corporation.

(b) Retirement or Layoff

If you retire or are laid off by the Corporation (including through a voluntary separation program that constitutes a window program under Section 409A of the Code) and the effective date of your retirement or layoff is after August 25, 2021 (the “Minimum Service Date”), but before the Vesting Date, you will continue to vest in your RSUs and the DDEs as if you had remained

Award Date: February 25, 2021

Page 5

employed by the Corporation until the Vesting Date. The effective date of your retirement is the first day following the date you terminate services with the Corporation. Notwithstanding the foregoing, if you are an employee who has been identified by the Corporation as subject to Divestiture (as defined in Section 6 below), and the effective date of your layoff is after the Award Date but before the Minimum Service Date, you will continue to vest in your RSUs and the DDEs as if you remained employed by the Corporation until the Vesting Date.

As a condition to the vesting of any RSUs (and associated DDEs) upon your layoff in accordance with this Section, you will be required to execute and deliver to the Corporation a general release of claims against the Corporation in a form acceptable to the Corporation within the time period specified by the Corporation in such release and not revoke such release within any revocation period provided for therein. Except as otherwise expressly provided by the Corporation in writing, a failure to satisfy this condition will result in forfeiture of such RSUs (and associated DDEs) upon your layoff during the Restricted Period.

The vested RSUs will be exchanged for shares of Stock, and the related DDEs associated with the vested portion of your RSUs will be paid in cash, on or as soon as practicable after the Vesting Date, but in no event later than the March 15 following the end of the Restricted Period (or, for taxpayers in Canada or as otherwise required by local country law, in no event later than the December 31 following the end of the Restricted Period).

For purposes of this provision, the term “retirement” means retirement from service following attainment of (i) age 55 and ten years of service (at the time of termination), or (ii) age 65.

If you are employed in Canada, for purposes of the Award Agreement, the date of termination of employment will be the last day of actual and active employment. For the avoidance of doubt, except as may be required by applicable minimum standards legislation, no period of notice or payment in lieu of notice that is given or that ought to have been given under any applicable law or contract in respect of such termination of employment that follows or is in respect of a period after your last day of actual and active employment, if any, will be considered as extending your period of employment for purposes of determining your entitlement under this Award Agreement.

5. RESIGNATION OR TERMINATION BEFORE THE VESTING DATE

Except where prohibited by law, if you resign or your employment otherwise terminates before the Vesting Date, other than on account of death, total disability, layoff, or retirement (as described above), or Divestiture or Change in Control (as described below), you will forfeit your RSUs and the related DDEs on the date of your termination.

Except where prohibited by law, if your employment terminates for any reason before the Vesting Date, by action of the Corporation due to your misconduct, then you will forfeit your RSUs and the associated DDEs on the date of your termination. If your employment terminates due to your misconduct after the Minimum Service Date, but before the Vesting Date, then you will not be eligible for continued vesting under Section 4(b) of the Award Agreement, even if at the time of your termination due to misconduct you have attained (i) age 55 and ten years of service, or (ii) age 65. The business area or Enterprise Operations review committee responsible for

Award Date: February 25, 2021

Page 6

determinations of misconduct, or the Committee if you are an Elected Officer, will determine if your employment terminates due to misconduct.

6. DIVESTITURE

In the event of a Divestiture (as defined below) of all or substantially all of a business operation of the Corporation and such Divestiture results in the termination of your employment with the Corporation or its subsidiaries and the transfer of such employment to the other party to the Divestiture or the entity resulting from the Divestiture (or its affiliate), then the Committee may arrange for such other party or entity to assume or continue your RSUs or substitute equivalent restricted securities for your RSUs, with the same terms and conditions that apply to your RSUs pursuant to this Award Agreement, and the remainder of this Section 6 shall not apply.

If (i) such assumption, continuance or substitution of your RSUs does not occur, (ii) the Divestiture results in the termination of your employment with the Corporation or its subsidiaries, and (iii) your employment transfers to the other party to the Divestiture or the entity resulting from the Divestiture (or its affiliate), then the following rules will apply:

(a) Pro-rata Vesting. You shall be eligible to receive a fraction of your RSUs and the associated DDEs with respect to such fraction. The numerator of such fraction shall equal the number of days in the Restricted Period before your employment as an Employee terminated due to the Divestiture, and the denominator shall equal the total number of days in the Restricted Period. Fractional shares shall be rounded up to the next whole share.

(b) Special Rule if Retirement Eligible. Notwithstanding Section 6(a) immediately above, if at the time your employment with the Corporation or its subsidiaries terminates due to Divestiture and transfers to the other party to the Divestiture or the resulting entity to the Divestiture (or its affiliate), you are eligible for retirement treatment under Section 4(b) above (without regard to whether your termination occurs after the Minimum Service Date), then the Corporation will treat you as having retired and apply the vesting provision in Section 4(b) above to your RSUs.

(c) No Further Rights. The Committee shall have complete and absolute discretion to make the determinations called for under this Section 6, and all such determinations shall be binding on you and on any person who claims all or any part of your RSUs and associated DDEs on your behalf as well as on the Corporation. If you terminate employment during the Restricted Period due to Divestiture but are eligible to receive a portion of your RSUs and associated DDEs as a result of this Section 6, payment of such portion of your RSUs and associated DDEs shall be in full satisfaction of all rights you have under this Award Agreement and you will receive shares of Stock in exchange for RSUs and the cash payment for the DDEs as soon as practicable, but no later than sixty (60) days after your termination of employment with the Corporation.

For the purposes of this Section 6, the term “Divestiture” shall mean a transaction that results in the transfer of control of the business operation divested to any person, corporation, association, partnership, joint venture, limited liability company or other business entity of which less than 50% of the voting stock or other equity interests (in the case of entities other than corporations), is owned or controlled directly or indirectly by the Corporation, by one or more of the Corporation’s subsidiaries or by a combination thereof.

Award Date: February 25, 2021

Page 7

7. CHANGE IN CONTROL DURING THE RESTRICTED PERIOD

In the event of a consummation of a Change in Control during the Restricted Period, the number of RSUs subject to this Award and associated DDEs will become vested (i) on the effective date of the Change in Control if the RSUs are not assumed, continued, or equivalent restricted securities are not substituted for the RSUs by the Corporation or its successor, or (ii) if the RSUs are assumed, continued or substituted by the Corporation or its successor, on the effective date of your involuntary termination by the Corporation or its successor other than for Cause (as defined herein, not including death or total disability) or your voluntary termination with Good Reason (as defined herein), in either case, within the 24-month period following the consummation of the Change in Control.

In the event the RSUs and associated DDEs vest in accordance with this Section 7 (whether immediately following the Change in Control or following your termination), the shares of Stock or equivalent substituted securities in which you have become vested and the associated DDEs (less any Tax withholding) shall be delivered to you within 14 days of the date on which you become vested.

(a) “Cause” shall mean either of the following:

(i) Conviction for an act of fraud, embezzlement, theft or other act constituting a felony (other than traffic-related offenses or as a result of vicarious liability); or

(ii) Willful misconduct that is materially injurious to the Corporation’s financial position, operating results or reputation; provided, however that no act or failure to act shall be considered “willful” unless done, or omitted to be done, by you (a) in bad faith; (b) for the purpose of receiving an actual improper personal benefit in the form of money, property or services; or (c) in circumstances where you had reasonable cause to believe that the act or failure to act was unlawful.

(b) “Good Reason” shall mean, without your express written consent, the occurrence of any one or more of the following after the Change in Control:

(i) A material and substantial reduction in the nature or status of your authority or responsibilities;

(ii) A material reduction in your annualized rate of base salary;

(iii) A material reduction in the aggregate value of your level of participation in any short or long term incentive cash compensation

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Page 8

plan, employee benefit or retirement plan or compensation practices, arrangements, or policies;

(iv) A material reduction in the aggregate level of participation in equity-based incentive compensation plans; or

(v) Your principal place of employment is relocated to a location that is greater than 50 miles from your principal place of employment on the date the Change in Control is consummated.

Your continued employment following an event that would constitute a basis for voluntary termination with Good Reason shall not constitute Good Reason if you consent to, or waive your rights with respect to any circumstances constituting Good Reason. In addition, the occurrence of an event described in (i) through (v) shall constitute the basis for voluntary termination for Good Reason only if you provide written notice of your intent to terminate employment within 90 days of the first occurrence of such event and the Corporation has had at least 30 days from the date on which such notice is provided to cure such occurrence. If you do not terminate employment for Good Reason within 180 days after the first occurrence of the applicable grounds, then you will be deemed to have waived your right to terminate for Good Reason with respect to such grounds.

8. AMENDMENT AND TERMINATION OF PLAN OR AWARDS

As provided in Section 9 of the Plan, subject to certain limitations contained within Section 9, the Board of Directors may at any time amend, suspend or discontinue the Plan and the Committee may at any time deviate from or amend this Award Agreement. Notwithstanding Section 9 of the Plan, no such amendment, suspension or discontinuance of the Plan or deviation from or amendment of Award Agreements will, except with your express written consent, adversely affect your rights under this Award Agreement. This Award Agreement shall not be amended or interpreted in a manner that is reasonably believed to result in the imposition of Tax under Section 409A of the Code.

9. ACCEPTANCE OF AWARD AGREEMENT; ELECTRONIC DELIVERY

No Award is enforceable until you properly acknowledge your acceptance of this Award Agreement by completing the electronic receipt on the Stock Plan System as soon as possible but in no event later than the Acceptance Deadline. Acceptance of this Award Agreement must be made only by you personally or by a person acting pursuant to a power of attorney in the event of your inability to acknowledge your acceptance (and not by your estate, your spouse or any other person) and constitutes your consent to any action taken under the Plan consistent with its terms with respect to this Award. Notwithstanding the foregoing, this Award will be enforceable and deemed accepted, and will not be forfeited, if you are unable to accept this Award Agreement personally by the Acceptance Deadline, due to your death, disability, incapacity, deployment in the Armed Forces, or similar unforeseen circumstance as determined by the Corporation in its discretion. If you desire to accept this Award, you must acknowledge your acceptance and receipt of this Award Agreement electronically on or before the Acceptance Deadline, by going to the Stock Plan System at http://www.stockplanconnect.com.

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Assuming prompt and proper acknowledgment of this Award Agreement as described above, this Award will be effective as of the Award Date.

By accepting this Award Agreement, you consent to receive copies of the Prospectus applicable to this Award from the Stock Plan System (http://www.stockplanconnect.com) as well as to electronic delivery of the Corporation’s annual report on Form 10-K, proxy statement and quarterly reports on Form 10-Q. This consent can only be withdrawn by written notice to the Vice President of Total Rewards and Performance Management at Lockheed Martin Corporation, Mail Point 126, 6801 Rockledge Drive, Bethesda, MD 20817.

The Corporation will deliver any documents related to RSUs awarded under the Plan or future RSUs that may be awarded under the Plan through the Stock Plan System. The Corporation will request your consent to participate in the Plan through the Stock Plan System. You hereby consent to receive such documents and agree to participate in the Plan through the Stock Plan System.

Except as described above, if you do not personally acknowledge your acceptance of this Award Agreement on or before the Acceptance Deadline, this Award will be forfeited as noted above.

10. POST-EMPLOYMENT COVENANTS

Except where prohibited by law, by accepting this Award Agreement as described in Section 9, you agree to the terms of the Post-Employment Conduct Agreement contained in Exhibit A to this Award Agreement.

11. STOCK OWNERSHIP REQUIREMENTS

Except where prohibited by law, by accepting this Award Agreement through the procedure described in Section 9, you acknowledge receipt of the Stock Ownership Requirements (“Ownership Requirements”) attached as Exhibit B and agree to comply with such Ownership Requirements as amended from time to time. If you are not a Vice President (or above) on THE Award Date, but you are promoted to Vice President (or above) prior to the Vesting Date, the Ownership Requirements as in effect at that time shall become applicable to you on the date of your promotion to Vice President (or above).

12. DATA PRIVACY CONSENT FOR EMPLOYEES LOCATED OUTSIDE OF THE UNITED STATES

To the extent recognized under applicable law, if you are located outside of the United States, then by accepting this Award Agreement as described in Section 9, you hereby explicitly and unambiguously consent to, and acknowledge the need for, the collection, use and transfer, in electronic or other form, of your Personal Data (defined below) as described in this Award Agreement by and among the Corporation for the exclusive purpose of implementing, administering and managing your participation in the Plan.

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job title, any shares or directorships held in the Corporation, details of all awards or any other entitlement to shares awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Personal Data”). The Corporation acts as the controller/owner of this Personal Data, and processes this Personal Data for purposes of implementing, administering, and managing the Plan. The Corporation protects the Personal Data that it receives in the United States from the European Union (“EU”), or any other location outside the United States, in accordance with data transfer agreements based on EU-approved Standard Contractual Clauses.

You understand that Personal Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country or elsewhere, and that the recipient’s country may have different, including less stringent, data privacy laws and protections than your country. You may request a list with the names and addresses of any third-party recipients of the Personal Data at any time by contacting your local human resources representative. When disclosing Personal Data to these third parties, the Corporation provides appropriate safeguards for protecting the transfer of your Personal Data, such as establishing standard data protection clauses with the third parties as adopted by the European Commission. You may request a copy of, or information about, such safeguards by contacting your local human resources representative. You recognize that the Corporation and any other possible recipients including any present or future third-party recipients must receive, possess, use, retain and transfer your Personal Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Personal Data as may be required to a broker or other third party with whom the Corporation may elect to administer the settlement of any award. You understand that Personal Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan and comply with applicable legal requirements.

To the extent provided by your local law, you may, at any time, have the right to request: access to your Personal Data, rectification of your Personal Data, erasure of your Personal Data, restriction of processing of your Personal Data, portability of your Personal Data and information about the storage and processing of your Personal Data. You may also have the right to object, on grounds related to a particular situation, to the processing of your Personal Data, as well as to refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

13. EMPLOYEE ACKNOWLEDGEMENT

You acknowledge and agree that:

(a) the Plan is discretionary in nature and the Committee may amend, suspend, or terminate it at any time;

(b) the grant of the RSUs is voluntary and occasional and does not create any contractual or other right to receive future grants of any RSUs, or benefits in lieu of any RSUs even if RSUs have been granted repeatedly in the past;

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(c) all determinations with respect to such future RSUs, if any, including but not limited to the times when RSUs shall be granted or when RSUs shall vest, will be at the sole discretion of the Committee or its delegate;

(d) your participation in the Plan is voluntary;

(e) the value of the RSUs is an extraordinary item of compensation, which is outside the scope of your employment contract (if any), except as may otherwise be explicitly provided in your employment contract;

(f) the RSUs are not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculating termination, severance, resignation, redundancy, end of service, or similar payments, or bonuses, long-service awards, pension or retirement benefits;

(g) the RSUs shall expire upon termination of your employment for any reason except as may otherwise be explicitly provided in the Plan and this Award Agreement;

(h) the future value of the shares is unknown and cannot be predicted with certainty;

(i) no claim or entitlement to compensation or damages arises from the termination of the RSUs in accordance with the Plan and this Award Agreement or diminution in value of the RSUs or Stock and you irrevocably release the Corporation and your employer from any such claim that may arise;

(j) if you are a resident of Turkey, that the offer of this Award has been made by the Corporation to you personally in connection with your existing relationship with the Corporation or one or more of its affiliates, subsidiaries and/or related companies, and further, that the Award, the related shares of the Stock and the related offer thereof are not subject to regulation by any securities regulator in Turkey, or otherwise outside of the U.S.;

(k) if you are a resident of Hong Kong, that the Award and any Stock issued thereunder do not constitute a public offer of securities under Hong Kong law; and

(l) if you are a resident of Israel, you will hold any Stock issued to you upon the vesting of the Award with the Corporation’s designated broker, and you may not transfer such Stock to an account with another broker or request that share certificates be issued to you, until such time as you sell the Stock.

14. ENGLISH LANGUAGE

You have received the terms and conditions of this Award Agreement and any other related communications, and you consent to having received these documents in English. If you have received this Award Agreement or any other documents related to the Plan translated into a language other than English, and if the translated version is different from the English version, the English version will control.

Quebec Residents Only: The Parties have agreed that this Award Agreement, the Plan as well as any notice, document or instrument relating to them be drawn up in English only. You

Award Date: February 25, 2021

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acknowledge that, upon your reasonable request, the Corporation will provide a French translation of such documents to you. Les parties aux présentes ont convenu que la présente accord, le "Plan," ainsi que tous autres avis, actes ou documents s'y rattachant soient rédigés en anglais seulement. Vous reconnaissez que, à votre demande raisonnable, "the Corporation" fournit une traduction française de ces documents à vous.

15. CURRENCY EXCHANGE RISK

If your functional currency is not the U.S. dollar, you agree and acknowledge that you will bear any and all risk associated with the exchange or fluctuation of currency associated with the RSUs, including without limitation sale of the Stock and payment of DDEs (the “Currency Exchange Risk”). Any cash payments due to you under this Award Agreement will be converted to your functional currency at the rate determined by the Corporation, in its discretion, on the last day of the Restricted Period. You waive and release the Corporation and its subsidiaries from any potential claims arising out of the Currency Exchange Risk.

16. EXCHANGE CONTROL REQUIREMENTS

You agree and acknowledge that you will comply with any and all exchange control requirements applicable to the RSUs and the sale of Stock and any resulting funds including, without limitation, reporting or repatriation requirements. You further agree and acknowledge that you will determine whether any such requirements are applicable to the Award and any resulting funds, and that you are not relying on the Corporation for any advice in this regard.

17. MISCELLANEOUS

If you are on leave of absence, for the purposes of the Plan, you will be considered to still be in the employ of the Corporation unless otherwise provided in an agreement between you and the Corporation.

Nothing contained in this Award Agreement shall confer upon you any right of continued employment by the Corporation or guarantee that any future awards will be made to you under the Plan. In addition, nothing in this Award Agreement limits in any way the right of the Corporation to terminate your employment at any time. Neither the value of the RSUs awarded to you nor the DDEs will be taken into account for other benefits offered by the Corporation, including but not limited to pension benefits. Notwithstanding any other provision of this Award Agreement to the contrary, no Stock will be issued to you pursuant to this Award Agreement within six months from the Award Date.

Transactions involving Stock delivered under this Award Agreement are subject to the securities laws and CPS 722 (a copy of which has been made available to you). Among other things, CPS 722 prohibits employees of the Corporation from engaging in transactions that violate securities laws or involve hedging or pledging stock. Insiders are subject to additional restrictions. The Corporation recommends that Insiders consult with the Senior Vice President, General Counsel and Corporate Secretary or staff before entering into any transactions involving Stock or RSUs.

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You have no rights as a stockholder to any securities covered by this Award Agreement until the date on which you become the holder of record of such securities. Capitalized terms used, but not defined herein, shall have the meanings ascribed to them in the Plan.

Award Date: February 25, 2021

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Exhibit A

Post-Employment Conduct Agreement

(RSU Grant)

This Post-Employment Conduct Agreement (this “PECA”) attached as Exhibit A to the Award Agreement with an Award Date of February 25, 2021 (the “Award Agreement”), is entered into in consideration of, among other things, the grant of restricted stock units to me under the Award Agreement (the “RSUs”) pursuant to the Lockheed Martin Corporation 2020 Incentive Performance Award Plan (the “Plan”). References to the “Corporation” shall include Lockheed Martin Corporation and its Subsidiaries. By accepting the RSUs, I agree as follows:

1. Restrictions Following Termination of Employment.

(a) Covenant Not To Compete – Without the express written consent of the ”Required Approver” (as defined in Section 6), during the one-year period (or two-year period for Elected Officers) following the date of my termination of employment (the “Termination Date”) with the Corporation, I will not, directly or indirectly, be employed by, provide services to, or advise a “Restricted Company” (as defined in Section 6), whether as an employee, advisor, director, officer, partner or consultant, or in any other position, function or role that, in any such case,

(i) oversees, controls or affects the design, operation, research, manufacture, marketing, sale or distribution of “Competitive Products or Services” (as defined in Section 6) of or by the Restricted Company, or

(ii) would involve a substantial risk that the “Confidential or Proprietary Information” (as defined in Section 1(c) below) of the Corporation (including but not limited to technical information or intellectual property, strategic plans, information relating to pricing offered to the Corporation by vendors or suppliers or to prices charged or pricing contemplated to be charged by the Corporation, information relating to employee performance, promotions or identification for promotion, or information relating to the Corporation’s cost base) could be used to the disadvantage of the Corporation.

I acknowledge and agree that: (A) enforcement of this PECA pursuant to Sections 1(a)(i) and (ii) is necessary to protect, among other interests, the Corporation’s trade secrets and other Confidential or Proprietary Information, as defined by Section 1(c); and (B) Sections 1(a)(i) and (ii) shall not apply to me if I am a resident of or work in California, or if I work and/or reside in any other state or jurisdiction that prohibits or otherwise bans such a covenant between the Corporation and me.

To the extent permitted by applicable law, including but not limited to any applicable rules governing attorney conduct (such as the ABA Model Rules of Professional Conduct and state versions thereof), Sections 1(a)(i) and (ii) and Section 1(b) relating to non-solicitation, shall apply to individuals who are employed by the Corporation in an attorney position and whose occupation during the one-year (or two-year, for Elected Officers) period following employment with the Corporation does not include practicing law.

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In lieu of Section 1(a)(i) and (ii), as well as Section 1(b) relating to non-solicitation, the following Section 1(a)(iii) shall apply to individuals who are employed by the Corporation in an attorney position, and whose occupation during the one-year (or two-year, for Elected Officers) period following employment with the Corporation includes practicing law.

(iii) Post-Employment Activity As a Lawyer – I acknowledge that as counsel to the Corporation, I owe ethical and fiduciary obligations to the Corporation and that at least some of these obligations will continue even after my Termination Date with the Corporation. I agree that after my Termination Date I will comply fully with all applicable ethical and fiduciary obligations that I owe to the Corporation. To the extent permitted by applicable law, including but not limited to any applicable rules governing attorney conduct, I agree that I will not:

a. Represent any client in the same or a substantially related matter in which I represented the Corporation where the client’s interests are materially adverse to the Corporation; or

b. Disclose confidential information relating to my representation of the Corporation, including the disclosure of information that is to the disadvantage of the Corporation, except for information that is or becomes generally known.

The Corporation’s Senior Vice President, General Counsel, and Corporate Secretary or the General Tax Counsel, as applicable, will determine in their discretion whether an individual is employed by the Corporation in an attorney position.

(b) Non-Solicit – Without the express written consent of the Required Approver, during the two-year period following the Termination Date, I will not (i) cause or attempt to cause, directly or indirectly, the complete or partial loss of any contract in effect before the Termination Date between the Corporation and any customer, supplier, distributor or manufacturer of or to the Corporation with which I was responsible, in whole or in part, for soliciting, negotiating, implementing, managing, or overseeing or (ii) induce or attempt to induce, directly or indirectly, any person who is an employee of the Corporation with whom I worked or interacted with within two years prior to the Termination Date to cease employment with the Corporation in order to perform work or services for any entity other than the Corporation. I acknowledge and agree that the enforcement of this PECA pursuant to Section 1(b)(i) is necessary to protect, among other interests, the Corporation’s trade secrets and other Confidential or Proprietary Information, as defined by Section 1(c).

(c) Protection of Proprietary Information – Except to the extent required by law, following my Termination Date, I will have a continuing obligation to comply with the terms of any non-disclosure or similar agreements that I signed while employed by the Corporation committing to hold confidential the “Confidential or Proprietary Information” (as defined below) of the Corporation or any of its affiliates, subsidiaries, related companies, joint ventures, partnerships, customers, suppliers, partners, contractors or agents, in each case in accordance with the terms of such agreements. I will not use or disclose or allow the use or disclosure by others to any person or entity of Confidential or Proprietary Information of the Corporation or

Award Date: February 25, 2021

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others to which I had access or that I was responsible for creating or overseeing during my employment with the Corporation. In the event I become legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or otherwise) to disclose any proprietary or confidential information, I will immediately notify the Corporation’s Senior Vice President, General Counsel and Corporate Secretary as to the existence of the obligation and will cooperate with any reasonable request by the Corporation for assistance in seeking to protect the information. All materials to which I have had access, or which were furnished or otherwise made available to me in connection with my employment with the Corporation shall be and remain the property of the Corporation. For purposes of this PECA, “Confidential or Proprietary Information” means trade secrets, as defined by applicable law, and Proprietary Information within the meaning of CRX-015C (a copy of which has been made available to me), including but not limited to information that a person or entity desires to protect from unauthorized disclosure to third parties that can provide the person or entity with a business, technological, or economic advantage over its competitors, or which, if known or used by third parties or if used by the person’s or entity’s employees or agents in an unauthorized manner, might be detrimental to the person’s or entity’s interests. Confidential or Proprietary Information may include, but is not limited to:

(i) existing and contemplated business, marketing and financial business information such as business plans and methods, marketing information, cost estimates, forecasts, financial data, cost or pricing data, bid and proposal information, customer identification, sources of supply, contemplated product lines, proposed business alliances, and information about customers and competitors,

(ii) existing and contemplated technical information and documentation pertaining to technology, know how, equipment, machines, devices and systems, computer hardware and software, compositions, formulas, products, processes, methods, designs, specifications, mask works, testing or evaluation procedures, manufacturing processes, production techniques, research and development activities, inventions, discoveries, and improvements, and

(iii) human resources and personnel information.

(d) No Disparagement – Following the Termination Date, I will not make any statements, whether verbal or written, that disparage or reasonably may be interpreted to disparage the Corporation or its directors, officers, employees, technology, products or services with respect to any matter whatsoever.

(e) Cooperation in Litigation and Investigations – Following the Termination Date, I will, to the extent reasonably requested, cooperate with the Corporation in any pending or future litigation (including alternative dispute resolution proceedings) or investigations in which the Corporation or any of its subsidiaries or affiliates is a party or is required or requested to provide testimony and regarding which, as a result of my employment with the Corporation, I reasonably could be expected to have knowledge or information relevant to the litigation or investigation. Notwithstanding any other provision of this PECA, nothing in this PECA shall affect my obligation to cooperate with any governmental inquiry or investigation or to give truthful testimony in court.

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(f) Communications with Regulatory Authorities – Nothing in this PECA prohibits or restricts me (or my attorney) from initiating communications directly with, responding to an inquiry from, or providing testimony before the Securities and Exchange Commission or any other federal or state regulatory authority regarding a possible securities law violation.

(g) Notice under the Defend Trade Secrets Act – Notwithstanding anything in this PECA to the contrary:

(i) I will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made: (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and solely for the purpose of reporting or investigating a suspected violation of law; or (2) in a complaint or other document that is filed under seal in a lawsuit or other proceeding.

(ii) If I file a lawsuit for retaliation by the Corporation for reporting a suspected violation of law, I may disclose the Corporation’s trade secrets to my attorney and use the trade secret information in the court proceeding if I (1) file any document containing the trade secret under seal; and (2) do not disclose the trade secret, except pursuant to court order.

2. Consideration and Acknowledgement. I acknowledge and agree that the benefits and compensation opportunities being made available to me under the Award Agreement are in addition to the benefits and compensation opportunities that otherwise are or would be available to me in connection with my employment by the Corporation and that the grant of the RSUs is expressly made contingent upon my agreements with the Corporation set forth in this PECA. I acknowledge that the scope and duration of the restrictions in Section 1 are necessary to be effective and are fair and reasonable in light of the value of the benefits and compensation opportunities being made available to me under the Award Agreement. I further acknowledge and agree that as a result of the high level executive and management positions I hold with the Corporation and the access to and extensive knowledge of the Corporation's Confidential or Proprietary Information, employees, suppliers and customers, these restrictions are reasonably required for the protection of the Corporation's legitimate business interests, including, but not limited to, the Corporation’s Confidential or Proprietary Information.

3. Remedies For Breach of Section 1; Additional Remedies of Clawback and Recoupment.

(a) I agree, upon demand by the Corporation, to forfeit, return or repay to the Corporation the “Benefits and Proceeds” (as defined below) in the event any of the following occur:

(i) I breach any of the covenants or agreements in Section 1;

(ii) The Corporation determines that either (a) my intentional misconduct or gross negligence, or (b) my failure to report another person’s intentional misconduct or gross negligence of which I had knowledge during the period I was employed by the Corporation, contributed to the Corporation having to restate all or a portion of its financial statements filed for any period with the Securities and Exchange Commission;

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Page 18

(iii) The Corporation determines that I engaged in fraud, bribery, or any other illegal act, or that my intentional misconduct or gross negligence (including the failure to report another person’s intentional misconduct or gross negligence of which I had knowledge during the period I was employed by the Corporation) contributed to another person’s fraud, bribery, or other illegal act, which in any such case adversely affected the Corporation’s financial position or reputation;

(iv) The Corporation determines that my intentional misconduct or gross negligence caused severe reputational or financial harm to the Corporation;

(v) The Corporation determines that I misappropriated Confidential or Proprietary Information, as defined in Section 1(c), and I (A) intended to use the misappropriated Confidential or Proprietary Information to cause severe reputational or financial harm to the Corporation or (B) used the misappropriated Confidential or Proprietary Information in a manner that caused severe reputational or financial harm to the Corporation; or

(vi) Under such other circumstances specified by final regulation issued by the Securities and Exchange Commission entitling the Corporation to recapture or clawback “Benefits and Proceeds” (as defined below).

(b) The remedy provided in Section 3(a) shall not be the exclusive remedy available to the Corporation for any of the conduct described in Section 3(a) and shall not limit the Corporation from seeking damages or injunctive relief. For purposes of Section 3(a), a determination by the Corporation means, with respect to an Elected Officer, a determination by the Management Development and Compensation Committee of the Board of Directors of the Corporation (the “Committee”) and, with respect to any other employee, a determination by a review committee consisting of the Senior Vice President, Human Resources, the Senior Vice President, Ethics and Enterprise Assurance, and the Senior Vice President, General Counsel and Corporate Secretary (the “Review Committee”).

(c) For purposes of this Section 3, “Benefits and Proceeds” means (i) to the extent I own Stock issued in respect of vested RSUs, such Stock; (ii) to the extent I no longer own the shares of Stock of the Corporation issued in respect of the RSUs, cash in an amount equal to the greater of (x) the value of such Stock on the date the associated RSUs vested (which, unless otherwise determined by the Committee or the Review Committee, as applicable, shall be equal to the closing price of the shares of Stock as finally reported by the New York Stock Exchange on such date), and (y) the proceeds received in connection with the disposition of such Stock; and (iii) to the extent I have not earned the RSUs fully, all of my remaining rights, title or interest in my Award and any accrued dividend equivalents with respect thereto.

4. Injunctive Relief. I acknowledge that the Corporation’s remedies at law may be inadequate to protect the Corporation against any actual or threatened breach of the provisions of Section 1 or the conduct described in Section 3(a), and, therefore, without prejudice to any other rights and remedies otherwise available to the Corporation at law or in equity (including but not limited to, an action under Section 3(a)), the Corporation shall be entitled to the granting of injunctive relief in its favor and to specific performance without proof of actual damages and without the requirement of the posting of any bond or similar security.

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5. Invalidity; Unenforceability. It is the desire and intent of the parties that the provisions of this PECA shall be enforced to the fullest extent permissible. Accordingly, if any particular provision of this PECA is adjudicated to be invalid or unenforceable, this PECA shall be deemed amended to delete the portion adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of this provision in the particular jurisdiction in which such adjudication is made.

6. Definitions. Capitalized terms not defined in this PECA have the meaning given to them in the Plan, as applicable. For purposes of this PECA, the following terms have the meanings given below:

(a) “Restricted Company” means The Boeing Company, General Dynamics Corporation, Northrop Grumman Corporation, Raytheon Technologies Corporation, Honeywell International Inc., BAE Systems Inc., L3Harris Technologies, Inc., Thales, Airbus Group, Inc., Textron Inc., Leonardo S.p.A., Leidos Holdings, Inc. and (i) any entity directly or indirectly controlling, controlled by, or under common control with any of the foregoing, and (ii) any successor to all or part of the business of any of the foregoing as a result of a merger, reorganization, consolidation, spin-off, split-up, acquisition, divestiture, or similar transaction, or as a result of a name change.

(b) “Competitive Products or Services” means products or services that compete with, or are an alternative or potential alternative to, products sold or services provided by a subsidiary, business area, division or operating unit or business of the Corporation as of the Termination Date and at any time within the two-year period ending on the Termination Date; provided, that, (i) if I had direct responsibility for the business of, or function with respect to, a subsidiary, or for a business area, division or operating unit or business of the Corporation at any time within the two-year period ending on the Termination Date, Competitive Products or Services includes the products so sold or the services so provided during that two-year period by the subsidiary, business area, division or operating unit of the Corporation for which I had responsibility, and (ii) if I did not have direct responsibility for the business of, or function with respect to, a subsidiary, or for a business area, division or operating unit or business of the Corporation at any time within the two-year period ending on the Termination Date, Competitive Products or Services includes the products so sold or the services so provided by a subsidiary, business area, division or operating unit of the Corporation for which I had access (or was required or permitted such access in the performance of my duties or responsibilities with the Corporation) to Confidential or Proprietary Information of the Corporation at any time during the two-year period ending on the Termination Date.

(i) with respect to the President and Chief Executive Officer, the Management Development and Compensation Committee of the Corporation’s Board of Directors;

(ii) with respect to any Elected Officer (other than the President and Chief Executive Officer), the Corporation’s Chief Executive Officer; or

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(iii) with respect to all other employees, the Senior Vice President, Human Resources of the Corporation.

(d) “Elected Officer” means an officer of the Corporation who was elected to their position by the Corporation’s Board of Directors.

7. Miscellaneous.

(a) The Plan, the Award Agreement (with Exhibit B) and this PECA constitute the entire agreement governing the terms of the award of the RSUs to me.

(b) This PECA shall be governed by Maryland law, without regard to its provisions governing conflicts of law. Any enforcement of, or challenge to, this PECA may only be brought in the United States District Court for the District of Maryland, unless it is determined that such court does not have subject matter jurisdiction, in which case any such enforcement or challenge must be brought in the Circuit Court of Montgomery County in the State of Maryland. Both parties consent to the proper jurisdiction and venue of such court, as applicable, for the purpose of enforcing or challenging this PECA. This Section 7(b) shall not apply to residents of California.

(c) This PECA shall inure to the benefit of the Corporation’s successors and assigns and may be assigned by the Corporation without my consent.

(d) This PECA provides for certain obligations on my part following the Termination Date and shall not, by implication or otherwise, affect in any way my obligations to the Corporation during the term of my employment by the Corporation, whether pursuant to written agreements between the Corporation and me, the provisions of applicable Corporate policies that may be adopted from time to time or applicable law or regulation.

This PECA is effective as of the acceptance by me of the award of RSUs under the Award Agreement and is not contingent on the vesting of my RSUs.

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Exhibit B

Stock Ownership Requirements

Lockheed Martin’s Stock Ownership Requirements for Key Employees apply to all senior level positions of Vice President and above. This reflects the expectations of our major shareholders that management demonstrate its confidence in Lockheed Martin through a reasonable level of personal share ownership. This practice is consistent with other major U.S. corporations which link some portion of personal financial interests of key employees with those of shareholders.

Stock Ownership Requirements


Title			Annual Base Pay Multiple

President and Chief Executive Officer			6 times
Chief Operating Officer; Chief Financial Officer			4 times
Executive Vice Presidents			3 times
Senior Vice Presidents			2 times
Other Elected Officers			2 times
Other Vice Presidents			1 times

Satisfaction of Requirements

Covered employees may satisfy their ownership requirements with common stock in these categories:

•Shares owned directly.

•Shares owned by a spouse or a trust.

•Shares represented by monies invested in 401(k) Company Common Stock Funds or comparable plans.

•Share equivalents as represented by income deferred to the Company Stock Investment Option of the Deferred Management Incentive Compensation Plan (DMICP).

•Unvested Restricted Stock Units.

Key employees will be required to achieve the appropriate ownership level within five years and are expected to make continuous progress toward their target. Appointment to a new level will reset the five year requirement. Unexercised options prior to vesting are not counted toward meeting the guidelines.

Holding Period

Covered employees must retain net vested Restricted Stock Units and Performance Stock Units and the net shares resulting from any exercise of stock options if the ownership requirements are not yet satisfied.

Covered employees are asked to report annually on their progress toward attainment of their share ownership goals.

Document

Exhibit 10.2

Award Date: February 25, 2021

PERFORMANCE STOCK UNIT AWARD AGREEMENT GRANTED

UNDER THE LOCKHEED MARTIN CORPORATION

2020 INCENTIVE PERFORMANCE AWARD PLAN FOR

THE 2021 – 2023 PERFORMANCE PERIOD

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING

SECURITIES THAT HAVE BEEN REGISTERED UNDER THE

SECURITIES ACT OF 1933

This Award Agreement applies to the Performance Stock Unit (“PSUs”) Award granted by Lockheed Martin Corporation to you as of the Award Date (defined above) under the Lockheed Martin Corporation 2020 Incentive Performance Award Plan (“Plan”). The term “Target Award” as used in this Award Agreement refers only to the Target Award awarded to you under this Award Agreement and the term “Award” refers only to PSUs set forth in this Award Agreement. References to the “Corporation” include Lockheed Martin Corporation and its Subsidiaries.

This Award Agreement sets forth your Target Award as well as some of the terms and conditions of your Award under the Plan, as determined by the Management Development and Compensation Committee (“Committee”) of the Board of Directors. Additional terms and conditions, including tax information, are contained in the Plan and in the Prospectus relating to the Plan of which the Plan and this Award Agreement are a part. Your Target Award is identified in the electronic stock plan award recordkeeping system (“Stock Plan System”) maintained by the Corporation or its designee at http://www.stockplanconnect.com. The Prospectus is also available at this website.

Except as described in Section 18, your Award is not effective or enforceable until you properly acknowledge your acceptance of the Award by completing the electronic receipt on the Stock Plan System as soon as possible but in no event later than May 31, 2021 (the “Acceptance Deadline”). Except as described in Section 18, if you do not properly acknowledge your acceptance of this Award Agreement on or before the Acceptance Deadline, this Award will be forfeited.

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Assuming prompt and proper acknowledgement of your acceptance of this Award Agreement as described above and in Section 18, this Award will be effective as of the Award Date. Acceptance of this Award Agreement constitutes your consent to any action taken under the Plan consistent with its terms with respect to this Award and your agreement to be bound by the restrictions contained in Section 18, Exhibit A (“Post-Employment Conduct Agreement”) and Exhibit B (“Stock Ownership Requirements”), as amended from time to time.

Any withholding Tax on your Award will be satisfied by means of the Corporation reducing the number of shares of Stock (and associated DDEs) deliverable to you in respect of a vested Award. If you are an Insider at the time of income tax withholding, the Corporation will base withholding on the highest individual tax rate. If you are not an Insider at the time of income tax withholding, the Corporation will base withholding on the highest individual tax rate, unless you elect otherwise in accordance with procedures established by the Corporation during an election window that may be offered by the Corporation. If you elect a lower tax rate for withholding, then you may owe additional taxes as a result of the payment of the Award. The Corporation shall also have the right to (i) offset any other obligation of the Corporation to you (including but not limited to, by withholding from your salary) by an amount sufficient to satisfy the Tax withholding obligation, or (ii) require you (or your estate) to pay the Corporation an amount equal to the Tax withholding obligation.

If you are a taxpayer in a country other than the U.S., you agree to make appropriate arrangements with the Corporation or its subsidiaries for the satisfaction of all income and employment tax withholding requirements, as well as social insurance contributions applicable to the PSUs, the DDEs, and associated Stock. Please see the tax summary for your country available on the Stock Plan System at http://www.stockplanconnect.com. If you are a taxpayer in a country other than the U.S., you represent that you will consult with your own tax advisors in connection with this Award and that you are not relying on the Corporation for any tax advice.

Notwithstanding any other provision of this Award Agreement to the contrary, no Stock will be issued to you pursuant to this Award Agreement within six months from the Award Date. You have no rights as a stockholder to any securities covered by this Award Agreement until the date on which you become the holder of record of such securities.

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Capitalized terms used in this Award Agreement shall be defined in this Award Agreement or if not defined in this Award Agreement shall have the meaning given to the term in the Plan. Appendix A contains an index of all capitalized terms used in this Award Agreement.

Section 1. Shares Awarded; Performance Period; Vesting Period; Payment of Award.

1.1 Shares Awarded.

(a) Target Award. Your Target Award for the Performance Period under this Award Agreement shall be the number of whole shares of Stock identified as your Performance Stock Unit (“PSU”) Target Award in your account in the Stock Plan System at http://www.stockplanconnect.com.

The Award paid to you shall be calculated in accordance with Section 2.1.

(b) Maximum Award. Your Maximum Award for the Performance Period under this Award Agreement shall be the number of shares of Stock equal to 200% of your Target Award, subject to the provisions of Section 2.1 and the caps contained therein.

(c) Deferred Dividend Equivalents (“DDEs”). Your Award shall include a cash amount equal to the cash that would have been paid to you had you owned the number of whole shares of Stock equal to your final Award as determined under Section 2.1(d), from the Award Date until the end of the Performance Period.

1.2 Performance Period. The “Performance Period” under this Award Agreement is the three-year performance period that runs from January 1, 2021, until December 31, 2023.

1.3 Vesting Period. The “Vesting Period” under this Award Agreement is the period that runs from February 25, 2021, until the later of (i) February 25, 2024, or (ii) the date on which the Committee certifies in writing the Total Stockholder Return Performance Factor, the ROIC Performance Factor and the Cash Flow Performance Factor.

1.4 Payment of Award. Your Award will be paid to you in whole shares of Stock (either in book entry or paper form) pursuant to Section 5. The final number of whole shares, if any, payable to you under your Award is dependent upon the Corporation’s performance with respect to each of the metrics described in Section 3 and Section 4, the limits described in Sections 1.1(b) and 2 and your continued employment with the Corporation in accordance with Section 5. As a result of these requirements, the number of whole shares of Stock you receive at the end of the Vesting Period will be between 0% and 200% of your Target Award (as described in Section 2.1 below) and may be smaller than your Maximum Award (e.g., the performance factors could result in no payment in respect of your Award). Any certificates delivered to you may contain any legend the Corporation determines is appropriate under the securities laws. If you are an Insider subject to the reporting provisions of Section 16(a) of the Securities Exchange Act of 1934 (“Exchange Act”), delivery of Stock in payment of your Award for any reason may be delayed for six months. For example, if the delivery of the Stock would result in a nonexempt short-swing transaction under Section 16(b) of the Exchange Act, delivery will be delayed until the earliest date upon which the delivery either would not result in a

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nonexempt short-swing transaction or would otherwise not result in liability under Section 16(b) of the Exchange Act.

Section 2. Calculation of Award Payments.

2.1 End of Performance Period Calculation. Following the end of the Performance Period and prior to any shares of Stock being issued,

(a) The Committee will calculate the Total Stockholder Return Performance Factor based on the Corporation’s performance during the Performance Period relative to the performance of other corporations which compose the “Peer Performance Group” as defined in Section 3.1.

(b) The Committee will calculate the ROIC Performance Factor based on the Corporation’s ROIC during the Performance Period as compared to the projected ROIC for the Performance Period as set forth in the February 24, 2021 Committee resolution (“ROIC Target”).

(c) The Committee will calculate the Cash Flow Performance Factor based on the Corporation’s cumulative Cash Flow during the Performance Period as compared to the projected cumulative Cash Flow for the Performance Period as set forth in the February 24, 2021 Committee resolution (“Cash Flow Target”).

(d) Your “Earned Award” shall be calculated by multiplying the weighted average of the Total Stockholder Return Performance Factor, the ROIC Performance Factor, and the Cash Flow Performance Factor by your Target Award. Any resulting fractional share shall be rounded up to the nearest whole share. The Total Stockholder Return Performance Factor, the ROIC Performance Factor, and the Cash Flow Performance Factor shall be weighted as follows in determining the weighted average of the three performance factors:

Total Stockholder Return Performance Factor 50%

ROIC Performance Factor 25%

Cash Flow Performance Factor 25%

Notwithstanding the foregoing, the number of shares of Stock you receive as your final Award shall be reduced to the extent necessary so that the Fair Market Value of your Earned Award on the last day of the Vesting Period does not exceed the product of (a) the Fair Market Value of a share of Stock on the Award Date, multiplied by (b) 400%, multiplied by (c) the number of shares in your Earned Award.

You must (except as specified in Section 5) remain employed by the Corporation through the last day of the Vesting Period to receive your Award. No portion of your Award will be payable until it is fully vested in accordance with Sections 5.1 and 5.2.

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Performance Period with a transaction value in excess of $1 billion at the time of the closing of the transaction. In adjusting any ROIC Target and Cash Flow Target to account for the impact of any acquisition or disposition with a transaction value in excess of $1 billion, the Committee shall also adjust the ROIC Target and Cash Flow Target for any related divestiture(s) that may be required by any regulatory authorities in connection with or as a condition to approval or completion of such transaction (notwithstanding that any such divestiture may have a transaction value of less than $1 billion).

Section 3. Total Stockholder Return Performance Factor.

3.1. Peer Performance Group. The Total Stockholder Return Performance Factor will be based upon the relative ranking of the Corporation’s TSR (as defined in Section 3.2) for the Performance Period to the TSR for the Performance Period for each company in the “Peer Performance Group.” The “Peer Performance Group” shall consist of the following companies (each a “Peer Company”):


Company	Ticker	Company	Ticker
AECOM	ACM	L3 Harris Technologies, Inc.	LHX
Carrier Global Corporation	CARR	Northrop Grumman Corporation	NOC
Caterpillar Inc.	CAT	Otis Worldwide Corporation	OTIS
Cummins Inc.	CMI	PACCAR Inc.	PCAR
Deere & Co.	DE	Parker-Hannifin Corporation	PH
Eaton Corp. plc	ETN	Quanta Services, Inc.	PWR
Emerson Electric Co.	EMR	Raytheon Technologies Corporation	RTX
General Dynamics Corporation	GD	Stanley Black & Decker, Inc.	SWK
General Electric Company	GE	Textron, Inc.	TXT
Honeywell International Inc.	HON	The Boeing Company	BA
Howmet Aerospace Inc.	HWM	3M Company	MMM
Illinois Tool Works Inc.	ITW	Trane Technologies plc	TT
Jacobs Engineering Group Inc.	J	W.W. Grainger, Inc.	GWW
Johnson Controls International plc	JCI

The following rules apply to the composition and relative ranking of the Peer Performance Group during the Performance Period:

(a) If, on or before the last trading day of the twenty-fourth month of the Performance Period (i.e., on or before December 31, 2022), a Peer Company publicly announces that it has entered into a definitive agreement to be acquired (including, without limitation, a merger or other business combination of a Peer Company with another entity in which the Peer Company is not the survivor or the sale of all or substantially all of a Peer Company’s assets), then that Peer Company will be immediately removed from the Peer Performance Group as of the beginning of the Performance Period. In the case of the public announcement of a merger or other business combination involving two Peer Companies in which following the closing of such transaction neither Peer Company will

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survive, both Peer Companies will be immediately removed from the Peer Performance Group as of the beginning of the Performance Period.

(b) If, after the last trading day of the twenty-fourth month of the Performance Period (i.e., after December 31, 2022), a Peer Company publicly announces that it has entered into a definitive agreement to be acquired (including, without limitation, a merger or other business combination of a Peer Company with another entity in which the Peer Company is not the survivor or the sale of all or substantially all of a Peer Company’s assets), then that Peer Company’s TSR ranking will be fixed at its ranking relative to the Corporation’s TSR (i.e., ranking either above or below the Corporation) as of the date of the announcement. In the case of the public announcement of a merger or other business combination involving two Peer Companies in which following the closing of such transaction neither Peer Company will survive, both Peer Companies’ TSR ranking will be fixed at its ranking relative to the Corporation’s TSR as of the date of the announcement. For purposes of this Section 3.1(b), TSR will be calculated in accordance with Section 3.2, with the “Ending Price” determined using the average closing price of a share of common stock (as quoted in the principal market on which it is traded as of the beginning and the ending of the Performance Period) during the twenty (20) day trading period ending on the day before the announcement.

(c) If as a result of a public announcement of a transaction involving a Peer Company, a Peer Company is removed from the Peer Performance Group pursuant to Section 3.1(a) above or its TSR is fixed pursuant to Section 3.1(b) above and such transaction closes during the Performance Period and following the closing of such transaction the survivor is publicly traded on a securities exchange under the Peer Company’s pre-transaction ticker symbol or under another ticker symbol that includes the Peer Company’s pre-transaction trading history, as determined by the Corporation using the tool the Corporation has designated in its discretion for computing Total Stockholder Return, then subsequent to the closing the Peer Company will be added back to the Peer Performance Group for the entire Performance Period. If both parties to the transaction are Peer Companies, then Section 3.1(a) or 3.1(b) will apply to one Peer Company and Section 3.1(a), 3.1(b), or 3.1(c) will apply to the other Peer Company. For example, if two Peer Companies announce a merger in which neither Peer Company is the survivor before the last trading day of the twenty-fourth month of the Performance Period, then (i) both Peer Companies will be removed immediately from the Peer Performance Group under Section 3.1(a), and (ii) one Peer Company will be added back into the Peer Performance Group only if the merger closes during the Performance Period and the post-merger entity continues to trade under the Peer Company’s pre-merger ticker symbol or a new ticker symbol that includes the Peer Company’s pre-transaction trading history.

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December 31, 2022), a transaction involving one Peer Company that was announced prior to the start of the Performance Period closes, and the survivor is not publicly traded on a securities exchange under the Peer Company’s pre-transaction ticker symbol or under another ticker symbol that includes the Peer Company’s pre-transaction trading history, as determined by the Corporation using the tool the Corporation has designated in its discretion for computing Total Stockholder Return, then the Peer Company will be immediately removed from the Peer Performance Group as of the beginning of the Performance Period. If, after the last trading day of the twenty-fourth month of the Performance Period (i.e., after December 31, 2022), a transaction involving one Peer Company that was announced prior to the start of the Performance Period closes and the survivor is not publicly traded on a securities exchange under the Peer Company’s pre-transaction ticker symbol or under another ticker symbol that includes the Peer Company’s pre-transaction trading history, as determined by the Corporation using the tool the Corporation has designated in its discretion for computing Total Stockholder Return, then that Peer Company’s TSR ranking will be fixed at its ranking relative to the Corporation’s TSR (i.e., ranking either above or below the Corporation) as of the closing of the transaction. For purposes of the previous sentence of this Section 3.1(d), TSR will be calculated in accordance with Section 3.2, with the “Ending Price” determined using the average closing price of a share of common stock (as quoted in the principal market on which it is traded as of the beginning and the ending of the Performance Period) during the twenty (20) day trading period ending on the day before the closing of the transaction.

(e) If a Peer Company files for bankruptcy under the US Bankruptcy Code (Title 11 of the United States Code) at any time during the Performance Period, then that Peer Company will be ranked last for purposes of the end of Performance Period calculation described in Section 3.2.

3.2. Calculation of Total Stockholder Return Performance Factor.

Your Total Stockholder Return Performance Factor, expressed as a percentage, will be determined in accordance with the table below based on the Corporation’s Percentile Ranking of TSR against the Peer Performance Group for the Performance Period; provided, however, that, notwithstanding anything in this Award Agreement to the contrary, if the Corporation’s TSR for the three-year Performance Period is negative, the maximum Total Stockholder Return Performance Factor shall not exceed 100%. At the end of the Performance Period, each company’s TSR shall be ranked among the TSRs for each other company in the Peer Performance Group on a percentile basis (using the Excel PERCENTRANK function), taking into account any changes to the Peer Performance Group or ranking changes made during the Performance Period in accordance with Section 3.1(a) – (e) (the “Percentile Ranking”).

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Band	Percentile Ranking	Total Stockholder Return Performance Factor
One	75th - 100th	200% (Maximum)
Two	60th	150%
Three	50th	100%
Four	40th	50%
Five	35th	25% (Threshold)

If the Corporation’s TSR puts the Corporation over the listed Percentile Ranking for the applicable Band (other than Band One) in the above table, your Total Stockholder Return Performance Factor shall be interpolated on a linear basis.

For purposes of this Award Agreement, “Total Shareholder Return” or “TSR” means on a percentage basis, with respect to the Corporation or any Peer Company, the price appreciation of such company’s common stock plus the value of reinvested dividends, calculated using the Beginning Price and the Ending Price, where

“Ending Price” means the average closing price of a share of common stock during the twenty (20) day trading period ending December 31, 2023 (or another ending date specified in Section 3.1); and

“Beginning Price” means the average closing price of a share of common stock during the twenty (20) day trading period ending December 31, 2020.

The Committee, in its sole discretion, may adjust TSR as necessary for any changes in equity structure, including but not limited to stock splits or other stock dividends. The Total Stockholder Return for the Corporation and each Peer Company shall be computed from data available to the public using the tool the Corporation has designated in its discretion for computing Total Stockholder Return. The Corporation’s Total Stockholder Return will be based on the performance of the Stock. With respect to the Peer Companies, the Total Stockholder Return of each company that is taken into account in computing each Peer Company’s Total Stockholder Return will be based on the equity security of the relevant company that is traded using the ticker symbol indicated in the chart in Section 3.1 to the right of the Peer Company’s name, or a successor ticker symbol determined as described in Section 3.1(c) or Section 3.1(d).

Section 4. ROIC Performance Factor and Cash Flow Performance Factor.

4.1 ROIC Performance Factor. The ROIC Performance Factor will be determined by comparing the Corporation’s ROIC for the Performance Period to the ROIC Target and then identifying the ROIC Performance Factor based upon the factor associated with the percentage of ROIC Target on the following table:

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ROIC Band			ROIC Performance Factor
112% of Target			200% (Maximum)
ROIC Target			100%
90% of Target			25% (Threshold)

(a) ROIC Definition. For purposes of this Award Agreement, “ROIC” means return on invested capital for the Performance Period calculated as (A) average annual (i) net income (excluding any charge or addition to net income resulting solely from adjustment of deferred tax assets and liabilities for the effect of enactment of corporate tax reform and related legislation and regulations that change the top United States federal corporate income tax rate by two or more percentage points after the Award Date (“Tax Reform”)), plus (ii) interest expense times one minus the weighted average of the highest marginal federal corporate income tax rates over the three year Performance Period, adjusted to reflect any applicable limitations on deductibility of the Corporation’s interest expense, divided by (B) the average thirteen quarter-end investment balances (beginning with the quarter-end immediately preceding the beginning of the Performance Period) consisting of (i) debt (including current maturities of long-term debt) plus (ii) stockholders’ equity plus the postretirement plans amounts determined quarterly as included in the Corporation’s Statement of Stockholders’ Equity. For any year in which net income would otherwise be affected by (I) Tax Reform; or (II) a change in law or interpretation of law related to the amortization of research or experimental expenditures under Section 174 of the Code, as amended from time to time, as reflected in any future Long Range Plan, financial statement or tax return, net income shall be adjusted by substituting the effective tax rate assumed in the 2021 Long Range Plan for the actual effective tax rate (and ignoring the adjustment under clause (A)(i) above, if any, to the extent necessary to avoid double counting of tax impacts). Net income also shall be adjusted to exclude any non-cash settlement charge to earnings resulting solely from one or more risk transfer transactions to manage the Corporation’s pension liabilities that were not included in the 2021 Long Range Plan, including any transactions involving the purchase of a group annuity contract for a portion of the Corporation’s outstanding defined benefit pension obligations that are treated as a settlement for accounting purposes.

(b) ROIC Determination. Each component of ROIC and the calculation of any postretirement plans amounts recorded in the Corporation’s Statement of Stockholders’ Equity shall be determined by the Committee in accordance with generally accepted accounting principles in the United States and be based upon the comparable numbers reported on the Corporation’s audited consolidated financial statements or, if audited financial statements are not available for the date or period on which ROIC is being determined, the Committee shall make its determination in a manner consistent with the historical practices used by the Corporation in determining the components of ROIC and postretirement plans amounts recorded in the Corporation’s Statement of Stockholders’ Equity for purposes of reporting those items on its audited financial statements, as modified by this paragraph. Notwithstanding the foregoing, ROIC will be adjusted to exclude the impact of any change in accounting standards or adoption of any new accounting standard that was not included in the 2021 Long Range Plan that is required

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under generally accepted accounting principles in the United States and that is reported in the Corporation’s filings with the Securities and Exchange Commission as having a material effect on the Corporation’s consolidated financial statements. ROIC, as included in the 2021 Long Range Plan, and the change in ROIC for purposes of the ROIC Performance Factor, will be determined in accordance with this Section 4.1(b).

4.2 Cash Flow Performance Factor. The Cash Flow Performance Factor will be determined by comparing the Corporation’s cumulative Cash Flow during the Performance Period to the Cash Flow Target, and then identifying the Cash Flow Performance Factor based upon the factor associated with the change from the Cash Flow Target on the following table:


Cash Flow Band			Cash Flow Performance Factor
120% of Target			200% (Maximum)
Cash Flow Target			100%
85% of Target			25% (Threshold)

(a) Cash Flow Definition. For purposes of this Award Agreement, “Cash Flow” means net cash flow from operations, adjusted to exclude the impact of: (i) the aggregate after tax difference between the amount forecasted in the Corporation’s 2021 Long Range Plan to be contributed by the Corporation to the Corporation’s defined benefit pension plans during the Performance Period and the actual amounts contributed by the Corporation during the Performance Period; (ii) any tax payments or tax benefits during the Performance Period associated with the divestiture of business units, other than tax payments or tax benefits that were included in the Corporation’s 2021 Long Range Plan; (iii) for any year in which Cash Flow would otherwise be affected by (I) Tax Reform; or (II) an annual net change in cash tax liability resulting from a change in law or interpretation of law related to the amortization of research or experimental expenditures under Section 174 of the Code, as amended from time to time, as reflected in any future Long Range Plan, financial statement or tax return, the aggregate difference between the tax payments forecasted in the 2021 Long Range Plan and the actual tax payments (and adjusting the amount under clause (i) above, if any, to the extent necessary to avoid double counting of tax impacts); and (iv) any net increase or decrease to cash flow from operations during the Performance Period not forecasted in the 2021 Long Range Plan resulting from (A) the deferral of payroll taxes per Section 2302 of the Coronavirus Aid, Relief, and Economic Security Act of 2020, (B) impacts to net progress invoice receipts per changes to Defense Federal Acquisition Regulation Supplement 232.501-1, as described in the Class Deviation issued by the U.S. Department of Defense in March 2020 (or any subsequent revisions), (C) cash flow impacts due to accelerated payments to suppliers directly related to neutralizing (A) and (B) above during any Performance Period, and (D) any other relief, support, stimulus, assistance or other program provided by any U.S. governmental authority solely and directly in response to the COVID-19 pandemic (and any evolutions thereof) on or after the date hereof that creates a material cash flow impact on the business similar in nature to the items described in (A) and (B) above.

(b) Cash Flow Determination. Cash Flow shall be determined by the Committee based upon the comparable numbers reported on the Corporation’s audited consolidated

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financial statements or, if audited financial statements are not available for the period for which Cash Flow is being determined, the Committee shall determine Cash Flow in a manner consistent with the historical practices used by the Corporation in determining net cash provided by operating activities as reported in its audited consolidated statement of cash flows, in either case as modified by this paragraph. Notwithstanding the foregoing, Cash Flow will be adjusted to exclude the impact of any change in accounting standards or adoption of any new accounting standard that was not included in the 2021 Long Range Plan that is required under generally accepted accounting principles in the United States and that is reported in the Corporation’s filings with the Securities and Exchange Commission as having a material effect on the Corporation’s consolidated financial statements.

4.3 Interpolation of ROIC and Cash Flow Metrics. If the Corporation’s ROIC or Cash Flow falls above or below Target and between the two percentages of Target listed in the applicable table in Section 4.1 or 4.2, the appropriate performance factor will be interpolated on a linear basis. Notwithstanding the foregoing, the ROIC Performance Factor will always be zero if the ROIC for the Performance Period is less than 90% of the ROIC Target and the Cash Flow Performance Factor will always be zero if the aggregate Cash Flow for the Performance Period is less than 85% of the Cash Flow Target.

4.4 For purposes of this Section 4, all references to the 2021 Long Range Plan shall be to the 2021 Long Range Plan as was in effect on February 24, 2021.

Section 5. Payment of Award.

5.1. Employment Requirement.

(a) General Rule. In order to be eligible to receive payment of your final Award as determined under Section 2.1(d), you must accept this Award Agreement as described in Section 18 and remain employed by the Corporation through the last day of the Vesting Period. Except as provided below or where prohibited by law, if your employment as an Employee terminates during the Vesting Period, you shall forfeit your right to receive all or any part of your Award. If you are on Corporation-approved leave of absence at any point during the Vesting Period, for purposes of this Award Agreement, you will be considered to still be in the employ of the Corporation, unless otherwise provided in an agreement between you and the Corporation.

(b) Exceptions. Notwithstanding Section 5.1(a), if the Committee determines

(i) that your employment as an Employee terminated, as a result of your death, Total Disability or Retirement, or a Divestiture (each as defined in Section 5.1(c)), or

(ii) that the Corporation terminated your employment involuntarily after August 25, 2021 (the “Minimum Service Date”), (except that, if you are an employee who has been identified by the Corporation as subject to Divestiture, “after the Minimum Service Date,” does not apply to you) as a result of a layoff,

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including through a voluntary layoff program that constitutes a window program under Section 409A of the Code,

you shall be eligible to receive a fraction of your Award and the DDEs with respect to such fraction. The numerator of such fraction shall equal the number of days from the Award Date to the date your employment as an Employee terminated, and the denominator shall equal the total number of days from the Award Date to the end of the Vesting Period.

As a condition to being eligible to receive a portion of your Award and the DDEs with respect to such portion as a result of your layoff in accordance with Section 5.1(b)(2), you will be required to execute and deliver to the Corporation a general release of claims against the Corporation in a form acceptable to the Corporation within the time period specified by the Corporation in such release and not revoke such release within any revocation period provided for therein. Except as otherwise expressly provided by the Corporation in writing, a failure to satisfy this condition will result in forfeiture of your right to receive all or any part of your Award on the date of your layoff.

The Committee shall have complete and absolute discretion to make the determinations called for under this Section 5.1(b), and all such determinations shall be binding on you and on any person who claims all or any part of your Award on your behalf as well as on the Corporation.

(i) Your employment as an Employee shall be treated as terminating because of a “Total Disability” on the date you commence receiving a benefit under the Corporation’s long-term disability plan in which you participate, or if you are not enrolled in the Corporation’s long-term disability plan, the date on which long-term disability benefits would commence under the plan under which you would have been covered, had you enrolled, using the standards set forth in that plan;

(ii) Your employment as an Employee shall be treated as terminating as a result of Divestiture if the Corporation divests all or substantially all of a business operation of the Corporation and such divestiture results in the termination of your employment with the Corporation and a transfer of such employment to the other party in the Divestiture. A “Divestiture” shall mean a transaction that results in the transfer of control of the business operation divested to any person, corporation, association, partnership, joint venture, limited liability company or other business entity of which less than 50% of the voting stock or other equity interests are directly or indirectly owned or controlled by the Corporation, by one or more of the Corporation’s Subsidiaries or by any combination thereof; and

(iii) Your employment as an Employee shall be treated as terminating because of “Retirement” if the effective date of your termination of employment is after the Minimum Service Date, and (1) after you reach age 65, or (2) after you

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reach age 55 and have (at the time of your termination) completed at least ten years of service with the Corporation. For this purpose, the effective date of your termination of employment is the day next following your last day worked.

(d) Resignation or Termination before the Last Day of the Vesting Period.

(i) Except where prohibited by law, if you resign or your employment otherwise terminates before the last day of the Vesting Period, other than on account of death, Total Disability, layoff, Retirement or Divestiture (as described above) or Change in Control (as described below), you will forfeit your right to receive all or any part of your Award on the date of your termination.

(ii) Except where prohibited by law, if your employment terminates for any reason before last day of the Vesting Period, by action of the Corporation due to your misconduct, then you will forfeit your right to receive all or any part of your Award on the date of your termination, even if at the time of your termination due to misconduct you have attained (i) age 55 and ten years of service, or (ii) age 65. The business area or Enterprise Operations review committee responsible for determinations of misconduct, or the Committee if you are an Elected Officer, will determine if your employment terminates due to misconduct.

5.2. Payment Rules.

(a) Vesting. If you are eligible to receive an Award under Section 5.1(a) or a fraction of an Award under Section 5.1(b), your Award shall vest on the last day of the Vesting Period.

(b) Method of Payment. Your Award shall be paid in whole shares of Stock. DDEs on the shares underlying your Award, if any, shall be paid in cash. In the event of your death, your payment will be made to your Beneficiary (as defined in the Plan).

(c) Timing of Payment. You shall have the right to receive your Award plus DDEs as soon as administratively practicable following the Vesting Period, but no later than the earlier of the March 15 or 60 days following the last day of the Vesting Period (for taxpayers in Canada or as otherwise required by local country law, no later than December 31st following the last day of the Vesting Period).

(d) Special Rules for Certain Employees Terminated During Performance Period. If you terminate employment during the Vesting Period but are eligible to receive a portion of your Award as a result of an exception under Section 5.1(b), payment of such portion of your Award and DDEs shall be in full satisfaction of all rights you have under this Award Agreement. The portion of your Award and DDEs payable to you following a termination of employment during the Vesting Period under circumstances described in Section 5.1(b) shall be paid to you or, in the event of your death, to your Beneficiary, at the time specified in Section 5.2(c).

(e) Payment Rules Applicable to Canadian Employees. If you are employed in Canada, for purposes of the Award Agreement, the date of termination of employment

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will be the last day of actual and active employment. For the avoidance of doubt, except as may be required by applicable minimum standards legislation, no period of notice or payment in lieu of notice that is given or that ought to have been given under any applicable law or contract in respect of such termination of employment that follows or is in respect of a period after your last day of actual and active employment, if any, will be considered as extending your period of employment for the purposes of determining your entitlement under this Agreement.

5.3. Cutback. Any payment called for under Section 5.2 will be reduced to the extent that such payment together with payments attributable to any other Share-Based Awards that are granted during 2021 as Performance-Based Awards exceeds 1,000,000 shares of Stock. Amounts in excess of 1,000,000 shares shall be forfeited. Any DDEs on forfeited shares shall also be forfeited.

Section 6. No Assignment – General Creditor Status.

You shall have no right to assign any interest you might have in all or any part of the Target Award or Award which has been granted to you under this Award Agreement and any attempt to do so shall be null and void and shall have no force or effect whatsoever. Furthermore, all payments called for under this Award Agreement shall be made from the Corporation’s general assets, and your right to payment from the Corporation’s general assets shall be the same as the right of a general and unsecured creditor of the Corporation. Until a share of Stock is delivered to you, you generally will not have the rights and privileges of a stockholder. In particular, you will not have the right to vote your PSUs on any matter put to the stockholders of the Corporation; you may not sell, transfer, assign, pledge, use as collateral or otherwise dispose of or encumber PSUs; and you will not have the right to receive any dividends paid to stockholders or dividend equivalents on the PSUs.

Section 7. Plan.

This Award Agreement shall be subject to all of the terms and conditions set forth in the Plan.

Section 8. Change in Control.

8.1. Change in Control during the Performance Period.

(a) In the event of a consummation of a Change in Control during the Performance Period, your Target Award (and DDEs) will become vested (i) on the effective date of the Change in Control if the PSUs are not assumed, continued, or equivalent restricted securities are not substituted for your PSUs by the Corporation or its successor, or (ii) if the PSUs are assumed, continued or substituted by the Corporation or its successor, on the effective date of your involuntary termination other than for Cause (not including death or Total Disability) or your voluntary termination with Good Reason, in either case, within the 24-month period following the consummation of the Change in Control; provided that any such termination is also a “separation from service” under Section 409A of the Code.

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(b) In the event the PSUs vest in accordance with this Section 8.1 (whether immediately following the Change in Control or following your termination), the shares of Stock or equivalent substituted securities in which you have become vested and DDEs shall be delivered to you within 14 days of the date on which you become vested.

8.2. Change in Control after the End of the Performance Period and before the End of the Vesting Period.

(a) In the event of a consummation of a Change in Control after the end of the Performance Period but during the Vesting Period, you will vest in your Target Award (and DDEs) (i) on the effective date of the Change in Control, if the PSUs are not assumed or continued or equivalent restricted securities are not substituted for your PSUs by the Corporation or its successor, or (ii) on the earlier of the end of the Vesting Period or the effective date of your involuntary termination other than for Cause (not including death or Total Disability) or your voluntary termination with Good Reason, in either case, prior to the end of the Vesting Period, if the PSUs are assumed, continued or substituted.

(b) In the event the PSUs vest in accordance with this Section 8.2 (whether immediately following the Change in Control or following your termination), the shares of Stock or equivalent substituted securities in which you have become vested and DDEs shall be delivered to you within 14 days of the date on which you become vested.

8.3 Special Definitions. For purposes of this Award Agreement:

(a) “Cause” shall mean either of the following:

(i) Conviction for an act of fraud, embezzlement, theft or other act constituting a felony (other than traffic-related offenses or as a result of vicarious liability); or

(b) “Good Reason” shall mean, without your express written consent, the occurrence of any one or more of the following after the Change in Control:

(i) A material and substantial reduction in the nature or status of your authority or responsibilities;

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(ii) A material reduction in your annualized rate of base salary;

(iii) A material reduction in the aggregate value of your level of participation in any short- or long-term incentive cash compensation plan, employee benefit or retirement plan or compensation practices, arrangements, or policies;

(iv) A material reduction in the aggregate level of participation in equity-based incentive compensation plans; or

(v) Your principal place of employment is relocated to a location that is greater than fifty (50) miles from your principal place of employment on the date the Change in Control is consummated.

8.4. Special Rule. Notwithstanding Section 8.1 or 8.2, if a payment in accordance with those provisions would result in a nonexempt short-swing transaction under Section 16(b) of the Exchange Act, then the date of distribution to you shall be delayed until the earliest date upon which the distribution either would not result in a nonexempt short-swing transaction or would otherwise not result in liability under Section 16(b) of the Exchange Act.

Section 9. Amendment and Termination.

As provided in Section 9 of the Plan, the Board of Directors may at any time amend, suspend or discontinue the Plan and the Committee may at any time deviate from or amend this Award Agreement. Notwithstanding the foregoing, no such action by the Board of Directors or the Committee shall amend Sections 1, 2, 3, 4, or 5 in a manner adverse to you or reduce the amount payable hereunder in a material manner without your written consent. For this purpose, a change in the amount payable hereunder that occurs solely by reason of a change in the date or form of payment due to Section 409A of the Code or Section 16 of the Exchange Act shall in no case be treated as a reduction prohibited by this Section 9. Thus, for example, if an amount payable by reason of Section 8 is delayed by an amendment to this Award Agreement or other action undertaken to comply with Section 409A of the Code and the amount payable is reduced solely by reason of a corresponding delay in the date of valuation of a share of Stock, such a change shall not be treated as a reduction prohibited by this Section 9. This Section 9 shall be

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construed and applied so as to permit the Committee to amend this Award Agreement at any time in any manner reasonably necessary or appropriate in order to comply with the requirements of Section 16 of the Exchange Act and of Section 409A of the Code, including amendments regarding the timing and form of payments hereunder.

Section 10. Data Privacy Consent For Employees Located Outside Of The United States.

To the extent recognized under applicable law, if you are located outside of the United States, then by accepting this Award Agreement as described in Section 18, you hereby explicitly and unambiguously consent to, and acknowledge the need for, the collection, use and transfer, in electronic or other form, of your Personal Data (defined below) as described in this Award Agreement by and among the Corporation for the exclusive purpose of implementing, administering and managing your participation in the Plan.

You understand that the Corporation collects, holds, uses and processes certain information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares or directorships held in the Corporation, details of all awards or any other entitlement to shares awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Personal Data”). The Corporation acts as the controller/owner of this Personal Data, and processes this Personal Data for purposes of implementing, administering, and managing the Plan. The Corporation protects the Personal Data that it receives in the United States from the European Union (“EU”), or any other location outside the United States, in accordance with data transfer agreements based on EU-approved Standard Contractual Clauses.

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information about the storage and processing of your Personal Data. You may also have the right to object, on grounds related to a particular situation, to the processing of your Personal Data, as well as to refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

Section 11. No Assurance of Employment; No Right to an Award; Value of Award.

Nothing contained in the Plan or in this Award Agreement shall confer upon you any right to continue in the employ or other service of the Corporation or constitute any contract (of employment or otherwise) or limit in any way the right of the Corporation to change your compensation or other benefits or to terminate your employment with or without cause. You acknowledge and agree that:

(a) the Plan is discretionary in nature and the Board of Directors may amend, suspend, or terminate it at any time;

(b) the grant of the PSUs is voluntary and occasional and does not create any contractual or other right to receive future grants of any PSUs, or benefits in lieu of any PSUs even if PSUs have been granted repeatedly in the past;

(c) all determinations with respect to such future PSUs, if any, including but not limited to the times when PSUs shall be granted or when PSUs shall vest, will be at the sole discretion of the Committee or its delegate;

(d) your participation in the Plan is voluntary;

(e) the value of the PSUs is an extraordinary item of compensation, which is outside the scope of your employment contract (if any), except as may otherwise be explicitly provided in your employment contract;

(f) the PSUs are not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculating termination, severance, resignation, redundancy, end of service, or similar payments, or bonuses, long-service awards, pension or retirement benefits;

(g) the PSUs shall expire upon termination of your employment for any reason except as may otherwise be explicitly provided in the Plan and this Award Agreement;

(h) the future value of the shares is unknown and cannot be predicted with certainty;

(i) no claim or entitlement to compensation or damages arises from the termination of the PSUs in accordance with the Plan and this Award Agreement or diminution in value of the PSUs or Stock and you irrevocably release the Corporation from any such claim that may arise;

Award Date: February 25, 2021

Page 19

(k) if you are a resident of Hong Kong, that the Award and any Stock issued thereunder do not constitute a public offer of securities under Hong Kong law; and

(l) If you are a resident of Israel, you will hold any Stock issued to you upon the vesting of the Award with the Corporation’s designated broker, and you may not transfer such Stock to an account with another broker or request that share certificates be issued to you until such time as you sell the Stock.

Section 12. Conflict.

In the event of a conflict between this Award Agreement and the Plan, the Plan document shall control.

Section 13. Compliance with Section 409A of the Code.

It is the intent of the Corporation that your Award not be subject to taxation under Section 409A(a)(1) of the Code. Nevertheless, in the event that your Award is or could be subject to Section 409A of the Code, as determined by the Senior Vice President, Human Resources, in consultation with the General Tax Counsel or their delegate, the following rules apply: (i) the Award will be interpreted and administered to meet the requirements of Sections 409A(a)(2), (3) and (4) of the Code and thus to be exempt from taxation under Section 409A(a)(1) of the Code; (ii) no Award payment will be made on account of your termination of employment unless the termination of employment constitutes a “separation from service” under Section 409A(a)(2)(a)(i) of the Code; and (iii) if you are a “specified employee” within the meaning of Section 409A of the Code, any payment in respect of this Award made on account of a termination of employment will be delayed for six (6) months following such termination of employment, and then made at the earliest date permitted by Section 409A of the Code.

Section 14. Post-Employment Covenants & Stock Ownership Requirements.

Except where prohibited by law, by accepting this Award Agreement as described in Section 18, you agree to the terms of the Post-Employment Conduct Agreement contained in Exhibit A to this Award Agreement and you acknowledge receipt of the Stock Ownership Requirements (“Ownership Requirements”) attached as Exhibit B to this Award Agreement and agree to comply with such Ownership Requirements as amended from time to time. If you are not a Vice President (or above) on the Award Date, but you are promoted to Vice President (or above) prior to the last day of the Vesting Period, the Ownership Requirements as in effect at that time shall become applicable to you on the date of your promotion to Vice President (or above).

Award Date: February 25, 2021

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Section 15. English Language.

You have received the terms and conditions of this Award Agreement and any other related communications, and you consent to having received these documents, in English. If you have received this Award Agreement or any other documents related to the Plan translated into a language other than English, and if the translated version is different from the English version, the English version will control.

Quebec Residents Only: The Parties have agreed that this Award Agreement, the Plan as well as any notice, document or instrument relating to them be drawn up in English only. You acknowledge that, upon your reasonable request, the Corporation will provide a French translation of such documents to you. Les parties aux présentes ont convenu que la présente accord, le "Plan," ainsi que tous autres avis, actes ou documents s'y rattachant soient rédigés en anglais seulement. Vous reconnaissez que, à votre demande raisonnable, "the Corporation" fournit une traduction française de ces documents à vous.

Section 16. Currency Exchange Risk.

If your functional currency is not the U.S. dollar, you agree and acknowledge that you will bear any and all risk associated with the exchange or fluctuation of currency associated with the Award (the “Currency Exchange Risk”). You waive and release the Corporation and its subsidiaries from any potential claims arising out of the Currency Exchange Risk.

Section 17. Exchange Control Requirements.

You agree and acknowledge that you will comply with any and all exchange control requirements applicable to the Award and any resulting funds including, without limitation, reporting or repatriation requirements. You further agree and acknowledge that you will determine whether any such requirements are applicable to the Award and any resulting funds, and that you are not relying on the Corporation for any advice in this regard.

Section 18. Acceptance of Award Agreement; Electronic Delivery.

By accepting this Award Agreement, you consent to receive copies of the Prospectus applicable to this Award through the Stock Plan System at http://www.stockplanconnect.com as well as to electronic delivery of the Corporation’s annual report on Form 10-K, proxy statement and quarterly reports on Form 10-Q. This consent can only be withdrawn by written notice to the Vice President of Total Rewards and Performance Management at Lockheed Martin Corporation, Mail Point 126, 6801 Rockledge Drive, Bethesda, MD 20817. The Corporation will deliver any documents related to the Award under the Plan or future Awards that may be awarded under the Plan through the Stock Plan System. The Corporation will request your consent to participate in the Plan through the Stock Plan System. You hereby consent to receive such documents and agree to participate in the Plan through the Stock Plan System.

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attorney in the event of your inability to acknowledge your acceptance (and not by your estate, your spouse or any other person) and constitutes your consent to any action taken under the Plan consistent with its terms with respect to this Award. Notwithstanding the foregoing, this Award will be enforceable and deemed accepted, and will not be forfeited, if you are unable to accept this Award Agreement personally by the Acceptance Deadline, due to your death, disability, incapacity, deployment in the Armed Forces, or similar unforeseen circumstance as determined by the Corporation in its discretion. If you desire to accept this Award, you must acknowledge your acceptance and receipt of this Award Agreement electronically on or before the Acceptance Deadline, by going to the Stock Plan System at http://www.stockplanconnect.com.

Assuming prompt and proper acknowledgment of this Award Agreement as described in Section 18, this Award will be effective as of the Award Date.

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Appendix A

Capitalized Terms


Acceptance Deadline			3rd ¶
Award			1st ¶
Award Date			Header
Cash Flow			§ 4.2(a)
Cash Flow Performance Factor Cash Flow Target			§ 4.2 § 2.1(c)
Cause			§ 8.3(a)
Change in Control			Plan
Code			Plan
Committee			2nd ¶
Corporation			1st ¶
Currency Exchange Risk			§ 16
DDE			§ 1.1(c)
Divestiture			§ 5.1(c)(ii)
Employee			Plan
Exchange Act			Plan
Fair Market Value			Plan
Good Reason			§ 8.3(b)
Insider			Plan
Maximum Award			§ 1.1(b)
Minimum Service Date			§ 5.1(b)(ii)
Ownership Requirements			§ 14
Peer Company			§ 3.1
Peer Performance Group			§ 3.1
Performance-Based Award Percentile Ranking			Plan § 3.2
Performance Period			§ 1.2
Personal Data			§ 10
Plan			1st ¶
Post-Employment Conduct Agreement			4th ¶
PSU			§ 1.1(a)
Retirement			§ 5.1(c)(iii)
ROIC			§ 4.1(a)
ROIC Performance Factor ROIC Target Share-Based Awards			§ 4.1 § 2.1(b) Plan
Stock			Plan
Stock Plan System			2nd ¶
Subsidiary			Plan
Target Award			1st ¶; § 1.1(a)

Award Date: February 25, 2021

Page 23


Tax Reform			§ 4.1(a)
Total Disability			§ 5.1(c)(i)
Total Stockholder Return or TSR			§ 3.2
Total Stockholder Return Performance Factor 2021 Long Range Plan			§ 3.1; § 3.2 § 4.4
Vesting Period			§ 1.3

Award Date: February 25, 2021

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Exhibit A

Post-Employment Conduct Agreement

(PSU Grant)

This Post-Employment Conduct Agreement (this “PECA”) attached as Exhibit A to the Award Agreement with an Award Date of February 25, 2021, (the “Award Agreement”) is entered into in consideration of, among other things, the grant of performance restricted stock units to me under the Award Agreement (the “PSUs”) pursuant to the Lockheed Martin Corporation 2020 Incentive Performance Award Plan (the “Plan”). References to the “Corporation” shall include Lockheed Martin Corporation and its Subsidiaries. By accepting the PSUs, I agree as follows:

1. Restrictions Following Termination of Employment.

(a) Covenant Not To Compete - Without the express written consent of the ”Required Approver” (as defined in Section 6), during the one-year period (or two-year period for Elected Officers) following the date of my termination of employment (the “Termination Date”) with the Corporation, I will not, directly or indirectly, be employed by, provide services to, or advise a “Restricted Company” (as defined in Section 6), whether as an employee, advisor, director, officer, partner or consultant, or in any other position, function or role that, in any such case,

(ii) would involve a substantial risk that the “Confidential or Proprietary Information” (as defined in Section 1(c)) of the Corporation (including but not limited to technical information or intellectual property, strategic plans, information relating to pricing offered to the Corporation by vendors or suppliers or to prices charged or pricing contemplated to be charged by the Corporation, information relating to employee performance, promotions or identification for promotion, or information relating to the Corporation’s cost base) could be used to the disadvantage of the Corporation.

I acknowledge and agree that: (A) enforcement of this PECA pursuant to Sections 1(a)(i) and (ii) is necessary to protect, among other interests, the Corporation’s trade secrets and other Confidential or Proprietary Information, as defined by Section 1(c); and (B) Section 1(a)(i) and (ii) shall not apply to me if I am a resident of or work in California or if I work and/or reside in any other state or jurisdiction that prohibits or otherwise bans such a covenant between the Corporation and me.

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Page 25

occupation during the one-year (or two-year, for Elected Officers) period following employment with the Corporation does not include practicing law.

(a) Represent any client in the same or a substantially related matter in which I represented the Corporation where the client’s interests are materially adverse to the Corporation; or

(b) Disclose confidential information relating to my representation of the Corporation, including the disclosure of information that is to the disadvantage of the Corporation, except for information that is or becomes generally known.

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Page 26

related companies, joint ventures, partnerships, customers, suppliers, partners, contractors or agents, in each case in accordance with the terms of such agreements. I will not use or disclose or allow the use or disclosure by others to any person or entity of Confidential or Proprietary Information of the Corporation or others to which I had access or that I was responsible for creating or overseeing during my employment with the Corporation. In the event I become legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or otherwise) to disclose any proprietary or confidential information, I will immediately notify the Corporation’s Senior Vice President, General Counsel and Corporate Secretary as to the existence of the obligation and will cooperate with any reasonable request by the Corporation for assistance in seeking to protect the information. All materials to which I have had access, or which were furnished or otherwise made available to me in connection with my employment with the Corporation shall be and remain the property of the Corporation. For purposes of this PECA, “Confidential or Proprietary Information” means trade secrets, as defined by applicable law, and Proprietary Information within the meaning of CRX-015C (a copy of which has been made available to me), including but not limited to information that a person or entity desires to protect from unauthorized disclosure to third parties that can provide the person or entity with a business, technological, or economic advantage over its competitors, or which, if known or used by third parties or if used by the person’s or entity’s employees or agents in an unauthorized manner, might be detrimental to the person’s or entity’s interests. Confidential or Proprietary Information may include, but is not limited to:

(iii) human resources and personnel information.

Award Date: February 25, 2021

Page 27

requested to provide testimony and regarding which, as a result of my employment with the Corporation, I reasonably could be expected to have knowledge or information relevant to the litigation or investigation. Notwithstanding any other provision of this PECA, nothing in this PECA shall affect my obligation to cooperate with any governmental inquiry or investigation or to give truthful testimony in court.

(g) Notice under the Defend Trade Secrets Act – Notwithstanding anything in this PECA to the contrary:

2. Consideration and Acknowledgement. I acknowledge and agree that the benefits and compensation opportunities being made available to me under the Award Agreement are in addition to the benefits and compensation opportunities that otherwise are or would be available to me in connection with my employment by the Corporation and that the grant of the PSUs is expressly made contingent upon my agreements with the Corporation set forth in this PECA. I acknowledge that the scope and duration of the restrictions in Section 1 are necessary to be effective and are fair and reasonable in light of the value of the benefits and compensation opportunities being made available to me under the Award Agreement. I further acknowledge and agree that as a result of the high level executive and management positions I hold with the Corporation and the access to and extensive knowledge of the Corporation's Confidential or Proprietary Information, employees, suppliers and customers, these restrictions are reasonably required for the protection of the Corporation's legitimate business interests, including, but not limited to, the Corporation’s Confidential or Proprietary Information.

3. Remedies For Breach of Section 1; Additional Remedies of Clawback and Recoupment.

(a) I agree, upon demand by the Corporation, to forfeit, return or repay to the Corporation the “Benefits and Proceeds” (as defined below) in the event any of the following occur:

Award Date: February 25, 2021

Page 28

(i) I breach any of the covenants or agreements in Section 1;

(iii) The Corporation determines that I engaged in fraud, bribery or any other illegal act or that my intentional misconduct or gross negligence (including the failure to report the acts of another person of which I had knowledge during the period I was employed by the Corporation) contributed to another person’s fraud, bribery or other illegal act, which in any such case adversely affected the Corporation’s financial position or reputation;

(iv) The Corporation determines that my intentional misconduct or gross negligence caused severe reputational or financial harm to the Corporation;

(c) For purposes of this Section 3, “Benefits and Proceeds” means (i) to the extent I own Stock issued in respect of vested PSUs, such Stock; (ii) to the extent I no longer own the shares of Stock of the Corporation issued in respect of the PSUs, cash in an amount equal to the greater of (x) the value of such Stock on the date the associated PSUs vested (which, unless otherwise determined by the Committee or the Review

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Page 29

Committee, shall be equal to the closing price of the shares of Stock as finally reported by the New York Stock Exchange on such date), and (y) the proceeds received in connection with the disposition of such Stock; and (iii) to the extent I have not earned the PSUs fully, all of my remaining rights, title or interest in my Award and any accrued dividend equivalents with respect thereto.

4. Injunctive Relief. I acknowledge that the Corporation’s remedies at law may be inadequate to protect the Corporation against any actual or threatened breach of the provisions of Section 1 or the conduct described in Section 3(a), and, therefore, without prejudice to any other rights and remedies otherwise available to the Corporation at law or in equity (including but not limited to, an action under Section 3(a)), the Corporation shall be entitled to injunctive relief in its favor and to specific performance without proof of actual damages and without the requirement of the posting of any bond or similar security.

6. Definitions. Capitalized terms not defined in this PECA have the meaning given to them in the Plan, as applicable. For purposes of this PECA, the following terms have the meanings given below:

(a) “Restricted Company” means The Boeing Company, General Dynamics Corporation, Northrop Grumman Corporation, Raytheon Technologies Corporation, Honeywell International Inc., BAE Systems Inc., L3Harris Technologies, Inc., Thales, Airbus Group, Inc., Textron Inc., Leonardo SpA, Leidos Holdings, Inc. and (i) any entity directly or indirectly controlling, controlled by, or under common control with any of the foregoing, and (ii) any successor to all or part of the business of any of the foregoing as a result of a merger, reorganization, consolidation, spin-off, split-up, acquisition, divestiture, or similar transaction, or as a result of a name change.

Award Date: February 25, 2021

Page 30

business area, division or operating unit of the Corporation for which I had access (or was required or permitted such access in the performance of my duties or responsibilities with the Corporation) to Confidential or Proprietary Information of the Corporation at any time during the two-year period ending on the Termination Date.

(i) with respect to the President and Chief Executive Officer, the Management Development and Compensation Committee of the Corporation’s Board of Directors;

(ii) with respect to an Elected Officer, the Corporation’s President and Chief Executive Officer; or

(iii) with respect to all other employees, the Senior Vice President, Human Resources of the Corporation.

(d) “Elected Officer” means an officer of the Corporation who was elected to their position by the Corporation’s Board of Directors.

7. Miscellaneous.

(a) The Plan, the Award Agreement (with Exhibit B) and this PECA constitute the entire agreement governing the terms of the award of the PSUs to me.

(c) This PECA shall inure to the benefit of the Corporation’s successors and assigns and may be assigned by the Corporation without my consent.

This PECA is effective as of the acceptance by me of the award of PSU under the Award Agreement and is not contingent on the vesting of my PSU Award.

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Exhibit B

Stock Ownership Requirements

Lockheed Martin’s Stock Ownership Requirements for Key Employees apply to all senior level positions of Vice President and above. This reflects the expectations of our major stockholders that management demonstrate its confidence in Lockheed Martin through a reasonable level of personal share ownership. This practice is consistent with other major U.S. corporations which link some portion of personal financial interests of key employees with those of shareholders.

Stock Ownership Requirements


Title			Annual Base Pay Multiple
Chairman, President and Chief Executive Officer			6 times
Chief Operating Officer; Chief Financial Officer			4 times
Executive Vice Presidents			3 times
Senior Vice Presidents			2 times
Other Elected Officers			2 times
Other Vice Presidents			1 times

Satisfaction of Requirements

Covered employees may satisfy their ownership requirements with common stock in these categories:

•Shares owned directly.

•Shares owned by a spouse or a trust.

•Shares represented by monies invested in 401(k) Company Common Stock Funds or comparable plans.

•Share equivalents as represented by income deferred to the Company Stock Investment Option of the Deferred Management Incentive Compensation Plan (DMICP).

•Unvested Restricted Stock Units

Holding Period

Covered employees are asked to report annually on their progress toward attainment of their share ownership goals.

Document

Exhibit 10.3

Award Date: February 25, 2021

LONG-TERM INCENTIVE PERFORMANCE AWARD AGREEMENT

GRANTED UNDER THE LOCKHEED MARTIN CORPORATION

2020 INCENTIVE PERFORMANCE AWARD PLAN FOR

THE 2021 – 2023 PERFORMANCE PERIOD

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING

SECURITIES THAT HAVE BEEN REGISTERED UNDER THE

SECURITIES ACT OF 1933

This Award Agreement applies to the Long-Term Incentive Performance (“LTIP”) Award granted by Lockheed Martin Corporation to you as of the Award Date (defined above) under the Lockheed Martin Corporation 2020 Incentive Performance Award Plan (“Plan”). The term “Target Award” as used in this Award Agreement refers only to the Target Award awarded to you under this Award Agreement and the term “Award” refers only to the LTIP Award set forth in this Award Agreement. References to the “Corporation” include Lockheed Martin Corporation and its Subsidiaries.

Assuming prompt and proper acknowledgement of your acceptance of this Award Agreement as described above and in Section 18, this Award will be effective as of the Award

Award Date: February 25, 2021

Page 2

Date. Acceptance of this Award Agreement constitutes your consent to any action taken under the Plan consistent with its terms with respect to this Award and your agreement to be bound by the restrictions contained in Section 18, Exhibit A (“Post-Employment Conduct Agreement”) and Exhibit B (“Stock Ownership Requirements”), as amended from time to time.

In general, the Corporation will reduce the amount paid to you under this Award Agreement by an amount sufficient to satisfy any applicable Tax withholding obligation, generally at the highest individual tax rate, unless you elect otherwise in accordance with procedures established by the Corporation during an election window that may be offered by the Corporation. If you elect a lower tax rate for withholding, then you may owe additional taxes as a result of the payment of the Award. The Corporation shall also have the right to (i) offset any other obligation of the Corporation to you (including but not limited to, by withholding from your salary) by an amount sufficient to satisfy the Tax withholding obligation, or (ii) require you (or your estate) to pay the Corporation an amount equal to the Tax withholding obligation.

If you are a taxpayer in a country other than the U.S., you agree to make appropriate arrangements with the Corporation or its subsidiaries for the satisfaction of all income and employment tax withholding requirements, as well as social insurance contributions applicable to the Award. Please see the tax summary for your country available on the Stock Plan System at http://www.stockplanconnect.com. If you are a taxpayer in a country other than the U.S., you represent that you will consult with your own tax advisors in connection with this Award and that you are not relying on the Corporation for any tax advice.

Section 1. Target Award; Performance Period.

1.1 Target Award. Your Target Award for the Performance Period under this Award Agreement shall be the U.S. dollar amount identified as your Target Award in your account in the Stock Plan System at http://www.stockplanconnect.com.

1.2 Performance Period. The Performance Period under this Award Agreement is the three-year performance period that runs from January 1, 2021, until December 31, 2023.

1.3 Payment of Award. The amount payable to you under your Award is dependent upon the Corporation’s performance as compared to the metrics described in Section 3 and Section 4 of this Award Agreement and your continued employment with the Corporation in accordance with Section 5 of this Award Agreement. As a result of these requirements, any payments you receive may be larger or smaller than your Target Award (e.g., the performance factors could result in no payment in respect of your Award). With respect to US-based Employees, when an Award becomes vested in accordance with Section 5.2(a), the Award

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Page 3

amount will be paid to the Participant in US Dollars. With respect to non-US based employees, when an Award becomes vested in accordance with Section 5.2(a), the amount payable to the Participant in cash will be the amount of the Participant’s Award converted into the Participant’s functional currency at the conversion rate determined by the Corporation in its discretion as of the date the Award becomes vested in accordance with Section 5.2(a).

Section 2. Calculation of Award Payments.

2.1 End of Performance Period Calculation. Following the end of the Performance Period and prior to any payments being made,

(d) Your “Potential Award” shall be calculated by multiplying the weighted average of the Total Stockholder Return Performance Factor, the ROIC Performance Factor, and the Cash Flow Performance Factor by your Target Award. The Total Stockholder Return Performance Factor, the ROIC Performance Factor, and the Cash Flow Performance Factor shall be weighted as follows in determining the weighted average of the three performance factors:

Total Stockholder Return Performance Factor 50%

ROIC Performance Factor 25%

Cash Flow Performance Factor 25%

You must (except as specified in Section 5) remain employed by the Corporation through the last day of the Performance Period to receive your Potential Award.

2.2 Adjustment of ROIC Target and Cash Flow Target. The Committee will adjust the ROIC Target and Cash Flow Target established as described in Section 2.1(b) and Section 2.1(c), respectively, to account for the impact of any acquisition or divestiture during the Performance Period with a transaction value in excess of $1 billion at the time of the closing of the transaction. In adjusting any ROIC Target and Cash Flow Target to account for the impact of any acquisition or disposition with a transaction value in excess of $1 billion, the Committee shall also adjust the ROIC Target and Cash Flow Target for any related divestiture(s) that may be required by any regulatory authorities in connection with or as a condition to approval or

Award Date: February 25, 2021

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completion of such transaction (notwithstanding that any such divestiture may have a transaction value of less than $1 billion).

Section 3. Total Stockholder Return Performance Factor.


Company	Ticker	Company	Ticker
AECOM	ACM	L3 Harris Technologies, Inc.	LHX
Carrier Global Corporation	CARR	Northrop Grumman Corporation	NOC
Caterpillar Inc.	CAT	Otis Worldwide Corporation	OTIS
Cummins Inc.	CMI	PACCAR Inc.	PCAR
Deere & Co.	DE	Parker-Hannifin Corporation	PH
Eaton Corp. plc	ETN	Quanta Services, Inc.	PWR
Emerson Electric Co.	EMR	Raytheon Technologies Corporation	RTX
General Dynamics Corporation	GD	Stanley Black & Decker, Inc.	SWK
General Electric Company	GE	Textron, Inc.	TXT
Honeywell International Inc.	HON	The Boeing Company	BA
Howmet Aerospace Inc.	HWM	3M Company	MMM
Illinois Tool Works Inc.	ITW	Trane Technologies plc	TT
Jacobs Engineering Group Inc.	J	W.W. Grainger, Inc.	GWW
Johnson Controls International plc	JCI

The following rules apply to the composition and relative ranking of the Peer Performance Group during the Performance Period:

Award Date: February 25, 2021

Page 5

business combination of a Peer Company with another entity in which the Peer Company is not the survivor or the sale of all or substantially all of a Peer Company’s assets), then that Peer Company’s TSR ranking will be fixed at its ranking relative to the Corporation’s TSR (i.e., ranking either above or below the Corporation) as of the date of the announcement. In the case of the public announcement of a merger or other business combination involving two Peer Companies in which following the closing of such transaction neither Peer Company will survive, both Peer Companies’ TSR ranking will be fixed at its ranking relative to the Corporation’s TSR as of the date of the announcement. For purposes of this Section 3.1(b), TSR will be calculated in accordance with Section 3.2, with the “Ending Price” determined using the average closing price of a share of common stock (as quoted in the principal market on which it is traded as of the beginning and the ending of the Performance Period) during the twenty (20) day trading period ending on the day before the announcement.

(d) If during the Performance Period a transaction involving one Peer Company that was announced prior to the start of the Performance Period closes, and the survivor is publicly traded on a securities exchange under the Peer Company’s pre-transaction ticker symbol or under another ticker symbol that includes the Peer Company’s pre-transaction trading history, as determined by the Corporation using the tool the Corporation has designated in its discretion for computing Total Stockholder Return, then the Peer Company will remain in the Peer Performance Group. If, on or before the last trading day of the twenty-fourth month of the Performance Period (i.e., on or before December 31, 2022), a transaction involving one Peer Company that was announced prior to the start of the Performance Period closes, and the survivor is not publicly traded on a securities exchange under the Peer Company’s pre-transaction ticker symbol or under another ticker symbol that includes the Peer Company’s pre-transaction trading history, as determined by the Corporation using the tool the Corporation has designated in its discretion for computing Total Stockholder Return, then the Peer Company will be

Award Date: February 25, 2021

Page 6

immediately removed from the Peer Performance Group as of the beginning of the Performance Period. If, after the last trading day of the twenty-fourth month of the Performance Period (i.e., after December 31, 2022), a transaction involving one Peer Company that was announced prior to the start of the Performance Period closes and the survivor is not publicly traded on a securities exchange under the Peer Company’s pre-transaction ticker symbol or under another ticker symbol that includes the Peer Company’s pre-transaction trading history, as determined by the Corporation using the tool the Corporation has designated in its discretion for computing Total Stockholder Return, then that Peer Company’s TSR ranking will be fixed at its ranking relative to the Corporation’s TSR (i.e., ranking either above or below the Corporation) as of the closing of the transaction. For purposes of the previous sentence of this Section 3.1(d), TSR will be calculated in accordance with Section 3.2, with the “Ending Price” determined using the average closing price of a share of common stock (as quoted in the principal market on which it is traded as of the beginning and the ending of the Performance Period) during the twenty (20) day trading period ending on the day before the closing of the transaction.

3.2. Calculation of Total Stockholder Return Performance Factor.


Band	Percentile Ranking	Total Stockholder Return Performance Factor
One	75th - 100th	200% (Maximum)
Two	60th	150%
Three	50th	100%
Four	40th	50%
Five	35th	25% (Threshold)

Award Date: February 25, 2021

Page 7

“Ending Price” means the average closing price of a share of common stock during the twenty (20) day trading period ending December 31, 2023 (or another ending date specified in Section 3.1); and

“Beginning Price” means the average closing price of a share of common stock during the twenty (20) day trading period ending December 31, 2020.

Section 4. ROIC Performance Factor and Cash Flow Performance Factor.


ROIC Band			ROIC Performance Factor
112% of Target			200% (Maximum)
ROIC Target			100%
90% of Target			25% (Threshold)

Award Date: February 25, 2021

Page 8

interest expense, divided by (B) the average thirteen quarter-end investment balances (beginning with the quarter-end immediately preceding the beginning of the Performance Period) consisting of (i) debt (including current maturities of long-term debt) plus (ii) stockholders’ equity plus the postretirement plans amounts determined quarterly as included in the Corporation’s Statement of Stockholders’ Equity. For any year in which net income would otherwise be affected by (I) Tax Reform; or (II) a change in law or interpretation of law related to the amortization of research or experimental expenditures under Section 174 of the Code, as amended from time to time, as reflected in any future Long Range Plan, financial statement or tax return, net income shall be adjusted by substituting the effective tax rate assumed in the 2021 Long Range Plan for the actual effective tax rate (and ignoring the adjustment under clause (A)(i) above, if any, to the extent necessary to avoid double counting of tax impacts). Net income also shall be adjusted to exclude any non-cash settlement charge to earnings resulting solely from one or more risk transfer transactions to manage the Corporation’s pension liabilities that were not included in the 2021 Long Range Plan, including any transactions involving the purchase of a group annuity contract for a portion of the Corporation’s outstanding defined benefit pension obligations that are treated as a settlement for accounting purposes.


Cash Flow Band			Cash Flow Performance Factor
120% of Target			200% (Maximum)
Cash Flow Target			100%
85% of Target			25% (Threshold)

Award Date: February 25, 2021

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(a) Cash Flow Definition. For purposes of this Award Agreement, “Cash Flow” means net cash flow from operations, adjusted to exclude the impact of: (i) the aggregate after tax difference between the amount forecasted in the Corporation’s 2021 Long Range Plan to be contributed by the Corporation to the Corporation’s defined benefit pension plans during the Performance Period and the actual amounts contributed by the Corporation during the Performance Period; (ii) any tax payments or tax benefits during the Performance Period associated with the divestiture of business units, other than tax payments or tax benefits that were included in the Corporation’s 2021 Long Range Plan; (iii) for any year in which Cash Flow would otherwise be affected by Tax Reform or an annual net change in cash tax liability resulting from a change in law or interpretation of law related to the amortization of research or experimental expenditures under Section 174 of the Code, as amended from time to time, as reflected in any future Long Range Plan, financial statement or tax return, the aggregate difference between the tax payments forecasted in the 2021 Long Range Plan and the actual tax payments (and adjusting the amount under clause (i) above, if any, to the extent necessary to avoid double counting of tax impacts); and (iv) any net increase or decrease to cash flow from operations during the Performance Period not forecasted in the 2021 Long Range Plan resulting from (A) the deferral of payroll taxes per Section 2302 of the Coronavirus Aid, Relief, and Economic Security Act of 2020, (B) impacts to net progress invoice receipts per changes to Defense Federal Acquisition Regulation Supplement 232.501-1, as described in the Class Deviation issued by the U.S. Department of Defense in March 2020 (or any subsequent revisions), (C) cash flow impacts due to accelerated payments to suppliers directly related to neutralizing (A) and (B) above during any Performance Period, and (D) any other relief, support, stimulus, assistance or other program provided by any U.S. governmental authority solely and directly in response to the COVID-19 pandemic (and any evolutions thereof) on or after the date hereof that creates a material cash flow impact on the business similar in nature to the items described in (A) and (B) above.

(b) Cash Flow Determination. Cash Flow shall be determined by the Committee based upon the comparable numbers reported on the Corporation’s audited consolidated financial statements or, if audited financial statements are not available for the period for which Cash Flow is being determined, the Committee shall determine Cash Flow in a manner consistent with the historical practices used by the Corporation in determining net cash provided by operating activities as reported in its audited consolidated statement of cash flows, in either case as modified by this paragraph. Notwithstanding the foregoing, Cash Flow will be adjusted to exclude the impact of any change in accounting standards or adoption of any new accounting standard that was not included in the 2021 Long Range Plan that is required under generally accepted accounting principles in the United States and that is reported in the Corporation’s filings with the Securities and Exchange Commission as having a material effect on the Corporation’s consolidated financial statements.

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Performance Factor will always be zero if the aggregate Cash Flow for the Performance Period is less than 85% of the Cash Flow Target.

4.4 For purposes of this Section 4, all references to the 2021 Long Range Plan shall be to the 2020 Long Range Plan as was in effect on February 24, 2021.

Section 5. Payment of Award.

5.1. Employment Requirement.

(a) General Rule. In order to be eligible to receive payment of your Award as determined under Sections 2.1(d), 5.2 and 5.3, you must accept this Award Agreement as described in Section 18 and remain employed by the Corporation through the last day of the Performance Period. Except as provided below or where prohibited by law, if your employment as an Employee terminates during the Performance Period, you shall forfeit your right to receive all or any part of your Award. If you are on Corporation-approved leave of absence at any point during the Performance Period, for purposes of this Award Agreement, you will be considered to still be in the employ of the Corporation, unless otherwise provided in an agreement between you and the Corporation.

(b) Exceptions. Notwithstanding Section 5.1(a), if the Committee determines

(1) that your employment as an Employee terminated as a result of your death, Total Disability or Retirement, or a Divestiture (each as defined in Section 5.1(c)), or

(2) that the Corporation terminated your employment involuntarily after August 25, 2021 (the “Minimum Service Date”), (except that, if you are an employee who has been identified by the Corporation as subject to Divestiture, “after the Minimum Service Date,” does not apply to you) as a result of a layoff, including through a voluntary layoff program that constitutes a window program under Section 409A of the Code,

you shall be eligible to receive a fraction of your Potential Award. The numerator of such fraction shall equal the number of days from the Award Date to the date your employment as an Employee terminated, and the denominator shall equal the total number of days from the Award Date to the end of the Performance Period.

As a condition to being eligible to receive a portion of your Potential Award as a result of your layoff in accordance with Section 5.1(b)(2), you will be required to execute and deliver to the Corporation a general release of claims against the Corporation in a form acceptable to the Corporation within the time period specified by the Corporation in such release and not revoke such release within any revocation period provided for therein. Except as otherwise expressly provided by the Corporation in writing, a failure to satisfy this condition will result in forfeiture of your right to receive all or any part of your Award on the date of your layoff.

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(1) Your employment as an Employee shall be treated as terminating because of a “Total Disability” on the date you commence receiving a benefit under the Corporation’s long-term disability plan in which you participate, or if you are not enrolled in the Corporation’s long-term disability plan, the date on which long-term disability benefits would commence under the plan under which you would have been covered, had you enrolled, using the standards set forth in that plan;

(2) Your employment as an Employee shall be treated as terminating as a result of Divestiture if the Corporation divests all or substantially all of a business operation of the Corporation and such divestiture results in the termination of your employment with the Corporation and a transfer of such employment to the other party in the Divestiture. A “Divestiture” shall mean a transaction that results in the transfer of control of the business operation divested to any person, corporation, association, partnership, joint venture, limited liability company or other business entity of which less than 50% of the voting stock or other equity interests are directly or indirectly owned or controlled by the Corporation, by one or more of the Corporation’s Subsidiaries or by any combination thereof; and

(3) Your employment as an Employee shall be treated as terminating because of “Retirement” if the effective date of your termination of employment is after the “Minimum Service Date, and (i) after you reach age 65, or (ii) after you reach age 55 and have (at the time of your termination) completed at least ten years of service with the Corporation. For this purpose, the effective date of your termination of employment is the day next following your last day worked.

(d) Resignation or Termination before the Last Day of the Performance Period.

(1) Except where prohibited by law, if you resign or your employment otherwise terminates before the last day of the Performance Period, other than on account of death, Total Disability, layoff, Retirement or Divestiture (as described above) or Change in Control (as described below), you will forfeit your right to receive all or any part of your Award on the date of your termination.

(2) Except where prohibited by law, if your employment terminates for any reason before the last day of the Performance Period by action of the Corporation due to your misconduct, then you will forfeit your right to receive all or any part of your Award on the date of your termination, even if at the time of your termination due to misconduct you have attained (i) age 55 and ten years of service, or (ii) age 65. The business area or Enterprise Operations review

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committee responsible for determinations of misconduct, or the Committee if you are an Elected Officer, will determine if your employment terminates due to misconduct.

5.2. Payment Rules.

(a) General Rule: Vesting; Method of Payment; Timing of Payment. If you are eligible to receive all, or a portion of, your Potential Award under Section 5.1, up to $10,000,000 of your Potential Award shall be fully vested on the date on which the Committee certifies in writing that your Target Award has become a Potential Award for the Performance Period. This portion of your award shall be known as the “Payable Portion” of your Potential Award. The Payable Portion of your Potential Award shall be (i) paid to you in cash as soon as administratively practicable after the certification date described above, but not later than March 15, 2023, or (ii) deferred in accordance with Section 5.2(c), if applicable. Subject to any deferral election under Section 5.2(c), in the event of your death, the Payable Portion of your Potential Award will be made to your Beneficiary (as defined in the Plan).

(b) Special Rules for Certain Employees Terminated During Performance Period. If you terminate employment during the Performance Period but are eligible to receive a portion of your Potential Award as a result of an exception under Section 5.1(b), payment of such portion of your Potential Award shall be in full satisfaction of all rights you have under this Award Agreement. The portion of your Potential Award payable to you following a termination of employment during the Performance Period under circumstances described in Section 5.1(b) shall be paid to you or, in the event of your death, to your Beneficiary, at the time specified in Section 5.2(a) (subject to Section 5.2(c)).

(c) Deferral. You may be given an opportunity to elect to defer any amounts payable under Section 5.2 of this Award Agreement. In such event, such election shall be irrevocable, shall be made in accordance with the terms of the Lockheed Martin Corporation Deferred Management Incentive Compensation Plan (“DMICP”) and the requirements of Section 409A of the Code, and shall be subject to such additional terms and conditions as are set by the Committee. A deferral election form and the terms and conditions for any deferral will be furnished to you in due course. The beneficiary designation for the DMICP shall govern any amounts deferred under the terms of the DMICP. This Section 5.2(c) shall not apply if you are a taxpayer in a country other than the United States or are not otherwise eligible to participate in the DMICP.

(d) Payment Rules Applicable to Canadian Employees. If you are employed in Canada, for purposes of the Award Agreement, the date of termination of employment will be the last day of actual and active employment. For the avoidance of doubt, except as may be required by applicable minimum standards legislation, no period of notice or payment in lieu of notice that is given or that ought to have been given under any applicable law or contract in respect of such termination of employment that follows or is in respect of a period after your last day of actual and active employment, if any, will be considered as extending your period of employment for the purposes of determining your entitlement under this Agreement.

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5.3. Cutback. Any portion of your Potential Award in excess of the Payable Portion of your Potential Award will be forfeited to the extent that such portion, together with payments attributable to any other Cash-Based Awards that are granted during 2021 as Performance Based Awards, exceeds $10,000,000. Amounts in excess of any Plan limits also shall be forfeited.

Section 6. No Assignment – General Creditor Status.

You shall have no right to assign any interest you might have in all or any part of the Target Award or Potential Award which has been granted to you under this Award Agreement and any attempt to do so shall be null and void and shall have no force or effect whatsoever. Furthermore, all payments called for under this Award Agreement shall be made in cash from the Corporation’s general assets, and your right to payment from the Corporation’s general assets shall be the same as the right of a general and unsecured creditor of the Corporation.

Section 7. Plan.

This Award Agreement shall be subject to all of the terms and conditions set forth in the Plan.

Section 8. Change in Control.

8.1. Vesting of Award Upon Change in Control. In the event of a consummation of a Change in Control during the Performance Period, your Target Award will become vested (i) on the effective date of the Change in Control if the LTIP Award is not assumed or continued, or equivalent cash incentives are not substituted for your LTIP Award by the Corporation or its successor, or (ii) if the LTIP is assumed, continued or substituted, upon your involuntary termination other than for Cause (not including death or Total Disability) or your voluntary termination with Good Reason, in either case, within the 24-month period following the consummation of the Change in Control. The cash payment in which you have become vested shall be delivered to you within fourteen (14) days of the date on which you become vested.

8.2 Special Definitions. For purposes of this Award Agreement:

(a) Cause shall mean either of the following:

1) Conviction for an act of fraud, embezzlement, theft or other act constituting a felony (other than traffic-related offenses or as a result of vicarious liability); or

2) Willful misconduct that is materially injurious to the Corporation’s financial position, operating results or reputation; provided, however that no act or failure to act shall be considered “willful” unless done, or omitted to be done, by you (a) in bad faith; (b) for the purpose of receiving an actual improper personal benefit in the form of money, property or services; or (c) in circumstances where you had reasonable cause to believe that the act or failure to act was unlawful.

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(b) Good Reason shall mean, without your express written consent, the occurrence of any one or more of the following after the Change in Control:

1) A material and substantial reduction in the nature or status of your authority or responsibilities;

2) A material reduction in your annualized rate of base salary;

3) A material reduction in the aggregate value of your level of participation in any short- or long- term incentive cash compensation plan, employee benefit or retirement plan or compensation practices, arrangements, or policies;

4) A material reduction in the aggregate level of participation in equity-based incentive compensation plans; or

5) Your principal place of employment is relocated to a location that is greater than fifty (50) miles from your principal place of employment on the date the Change in Control is consummated.

Your continued employment following an event that would constitute a basis for voluntary termination with Good Reason shall not constitute Good Reason if you consent to, or waive your rights with respect to, any circumstances constituting Good Reason. In addition, the occurrence of an event described in 1) through 5) shall constitute the basis for voluntary termination for Good Reason only if you provide written notice of your intent to terminate employment within 90 days of the first occurrence of such event and the Corporation has had at least 30 days from the date on which such notice is provided to cure such occurrence. If you do not terminate employment for Good Reason within 180 days after the first occurrence of the applicable grounds, then you will be deemed to have waived your right to terminate for Good Reason with respect to such grounds.

8.3. Special Rule. Notwithstanding Section 8.1, if a payment in accordance with those provisions would result in a nonexempt short-swing transaction under Section 16(b) of the Exchange Act, then the date of distribution to you shall be delayed until the earliest date upon which the distribution either would not result in a nonexempt short-swing transaction or would otherwise not result in liability under Section 16(b) of the Exchange Act.

Section 9. Amendment and Termination.

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payable by reason of Section 8 is delayed by an amendment to this Award Agreement or other action undertaken to comply with Section 409A of the Code, such a change shall not be treated as a reduction prohibited by this Section 9. This Section 9 shall be construed and applied so as to permit the Committee to amend this Award Agreement at any time in any manner reasonably necessary or appropriate in order to comply with the requirements of Section 16 of the Exchange Act and of Section 409A of the Code, including amendments regarding the timing and form of payments hereunder.

Section 10. Data Privacy Consent For Employees Located Outside Of The United States.

You understand that the Corporation collects, holds, uses, and processes certain information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares or directorships held in the Corporation, details of all awards or any other entitlement to shares awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Personal Data”). The Corporation acts as the controller/owner of this Personal Data, and processes this Personal Data for purposes of implementing, administering, and managing the Plan. The Corporation protects the Personal Data that it receives in the United States from the European Union (“EU”), or any other location outside the United States, in accordance with data transfer agreements based on EU-approved Standard Contractual Clauses.

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Section 11. No Assurance of Employment; No Right to an Award; Value of Award.

(a) the Plan is discretionary in nature and the Board of Directors may amend, suspend, or terminate it at any time;

(b) the grant of the Award is voluntary and occasional and does not create any contractual or other right to receive future grants of any Awards, or benefits in lieu of any Award even if Awards have been granted repeatedly in the past;

(c) all determinations with respect to such future Awards, if any, including but not limited to the times when Awards shall be granted or when Awards shall vest, will be at the sole discretion of the Committee or its delegate;

(d) your participation in the Plan is voluntary;

(e) the value of the Award is an extraordinary item of compensation, which is outside the scope of your employment contract (if any), except as may otherwise be explicitly provided in your employment contract;

(f) the Award is not part of normal or expected compensation or salary for any purpose, including, but not limited to, calculating termination, severance, resignation, redundancy, end of service, or similar payments, or bonuses, long-service awards, pension or retirement benefits;

(g) the Award shall expire upon termination of your employment for any reason except as may otherwise be explicitly provided in the Plan and this Award Agreement;

(h) the future value of the Award is unknown and cannot be predicted with certainty; and

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(i) no claim or entitlement to compensation or damages arises from the termination of the Award in accordance with the Plan and this Award Agreement or diminution in value of the Award and you irrevocably release the Corporation from any such claim that may arise.

Section 12. Conflict.

In the event of a conflict between this Award Agreement and the Plan, the Plan document shall control.

Section 13. Compliance with Section 409A of the Code.

Section 14. Post-Employment Covenants & Stock Ownership Requirements.

Except where prohibited by law, by accepting this Award Agreement as described in Section 18, you agree to the terms of the Post-Employment Conduct Agreement contained in Exhibit A to this Award Agreement and you acknowledge receipt of the Stock Ownership Requirements (“Ownership Requirements”) attached as Exhibit B to this Award Agreement and agree to comply with such Ownership Requirements as amended from time to time. If you are not a Vice President (or above) on the Award Date, but you are promoted to Vice President (or above) prior to the last day of the Performance Period, the Ownership Requirements as in effect at that time shall become applicable to you on the date of your promotion to Vice President (or above).

Section 15. English Language.

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translation of such documents to you. Les parties aux présentes ont convenu que la présente accord, le "Plan," ainsi que tous autres avis, actes ou documents s'y rattachant soient rédigés en anglais seulement. Vous reconnaissez que, à votre demande raisonnable, "the Corporation" fournit une traduction française de ces documents à vous.

Section 16. Currency Exchange Risk.

If your functional currency is not the U.S. dollar, you agree and acknowledge that you will bear any and all risk associated with the exchange or fluctuation of currency associated with the Award (the “Currency Exchange Risk”). You waive and release the Corporation and its subsidiaries from any potential claims arising out of the Currency Exchange Risk.

Section 17. Exchange Control Requirements.

Section 18. Acceptance of Award Agreement; Electronic Delivery.

By accepting this Award Agreement, you consent to receive copies of the Prospectus applicable to this Award through the Stock Plan System at http://www.stockplanconnect.com) as well as to electronic delivery of the Corporation’s annual report on Form 10-K, proxy statement and quarterly reports on Form 10-Q. This consent can only be withdrawn by written notice to the Vice President of Total Rewards and Performance Management at Lockheed Martin Corporation, Mail Point 126, 6801 Rockledge Drive, Bethesda, MD 20817. The Corporation will deliver any documents related to the Award under the Plan or future Awards that may be awarded under the Plan through the Stock Plan System. The Corporation will request your consent to participate in the Plan through the Stock Plan System. You hereby consent to receive such documents and agree to participate in the Plan through the Stock Plan System.

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Assuming prompt and proper acknowledgment of this Award Agreement as described in Section 18, this Award will be effective as of the Award Date.

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Appendix A

Capitalized Terms


Acceptance Deadline			3rd ¶
Award			1st ¶
Award Date Cash-Based Award Cash Flow			Header Plan § 4.2(a)
Cash Flow Performance Factor			§ 4.2
Cash Flow Target Cause Change in Control			§ 2.1(c) § 8.2(a) Plan
Code Committee			Plan 2nd ¶
Corporation			1st ¶
Currency Exchange Risk			§ 16
Divestiture Employee Exchange Act Good Reason Insider			§ 5.1(c)(2) Plan Plan § 8.2(b) Plan
Minimum Service Date			§ 5.1(b)(ii)
Ownership Requirements			§ 14
Payable Portion			§ 5.2(a)
Peer Company Peer Performance Group Percentile Ranking			§ 3.1 § 3.1 § 3.2
Performance-Based Award Performance Period			Plan § 1.2
Personal Data			§ 10
Plan			1st ¶
Post-Employment Conduct Agreement			4th ¶
Potential Award			§ 2.1(d)
ROIC			§ 4.1(a)
ROIC Performance Factor ROIC Target			§ 4.1 § 2.1(b)
Stock Plan System			2nd ¶
Subsidiary			Plan
Target Award			1st ¶, § 1.1
Tax Reform			§ 4.1(a)
Total Disability Total Stockholder Return or TSR			§ 5.1(c)(1) § 3.2
Total Stockholder Return Performance Factor 2021 Long Range Plan			§ 3.1; § 3.2 § 4.4

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Exhibit A

Post-Employment Conduct Agreement

(LTIP Grant)

This Post-Employment Conduct Agreement (this “PECA”) attached as Exhibit A to the Award Agreement with an Award Date of February 25, 2021, (the “Award Agreement”) is entered into in consideration of, among other things, the grant of a Long Term Incentive Performance Award to me under the Award Agreement (the “LTIP”) pursuant to the Lockheed Martin Corporation 2020 Incentive Performance Award Plan (the “Plan”). References to the “Corporation” shall include Lockheed Martin Corporation and its Subsidiaries. By accepting the LTIP, I agree as follows:

1. Restrictions Following Termination of Employment.

(a) Covenant Not To Compete – Without the express written consent of the “Required Approver” (as defined in Section 6), during the one-year (or two-year for Elected Officers) period following the date of my termination of employment (the “Termination Date”) with the Corporation, I will not, directly or indirectly, be employed by, provide services to, or advise a “Restricted Company” (as defined in Section 6), whether as an employee, advisor, director, officer, partner or consultant, or in any other position, function or role that, in any such case,

I acknowledge and agree that: (A) enforcement of this PECA pursuant to Sections 1(a)(i) and (ii) is necessary to protect, among other interests, the Corporation’s trade secrets and other Confidential or Proprietary Information, as defined by Section 1(c); and (B) Section 1(a)(i) and (ii) shall not apply to me if I am a resident of or work in California or if I work and/or reside in any other state or jurisdiction that prohibits or otherwise bans such a covenant between the Corporation and me.

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(a) Represent any client in the same or a substantially related matter in which I represented the Corporation where the client’s interests are materially adverse to the Corporation; or

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Corporation. In the event I become legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or otherwise) to disclose any proprietary or confidential information, I will immediately notify the Corporation’s Senior Vice President, General Counsel, and Corporate Secretary as to the existence of the obligation and will cooperate with any reasonable request by the Corporation for assistance in seeking to protect the information. All materials to which I have had access, or which were furnished or otherwise made available to me in connection with my employment with the Corporation shall be and remain the property of the Corporation. For purposes of this PECA, “Confidential or Proprietary Information” means trade secrets, as defined by applicable law, and Proprietary Information within the meaning of CRX-015C (a copy of which has been made available to me), including but not limited to information that a person or entity desires to protect from unauthorized disclosure to third parties that can provide the person or entity with a business, technological, or economic advantage over its competitors, or which, if known or used by third parties or if used by the person’s or entity’s employees or agents in an unauthorized manner, might be detrimental to the person’s or entity’s interests. Confidential or Proprietary Information may include, but is not limited to:

(iii) human resources and personnel information.

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(g) Notice under the Defend Trade Secrets Act – Notwithstanding anything in this PECA to the contrary:

2. Consideration and Acknowledgement. I acknowledge and agree that the benefits and compensation opportunities being made available to me under the Award Agreement are in addition to the benefits and compensation opportunities that otherwise are or would be available to me in connection with my employment by the Corporation and that the grant of the LTIP is expressly made contingent upon my agreements with the Corporation set forth in this PECA. I acknowledge that the scope and duration of the restrictions in Section 1 are necessary to be effective and are fair and reasonable in light of the value of the benefits and compensation opportunities being made available to me under the Award Agreement. I further acknowledge and agree that as a result of the high level executive and management positions I hold with the Corporation and the access to and extensive knowledge of the Corporation’s Confidential or Proprietary Information, employees, suppliers and customers, these restrictions are reasonably required for the protection of the Corporation’s legitimate business interests, including, but not limited to, the Corporation’s Confidential or Proprietary Information.

3. Remedies For Breach of Section 1; Additional Remedies of Clawback and Recoupment.

(a) I agree, upon demand by the Corporation, to forfeit, return or repay to the Corporation the “Benefits and Proceeds” (as defined below) in the event any of the following occur:

(i) I breach any of the covenants or agreements in Section 1;

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(iv) The Corporation determines that my intentional misconduct or gross negligence caused severe reputational or financial harm to the Corporation;

(c) For purposes of this Section 3, “Benefits and Proceeds” means (i) to the extent I have earned any of the LTIP, any cash paid to me, whether paid currently or deferred; and (ii) to the extent I have not earned the LTIP fully, all of my remaining rights, title or interest in the LTIP.

4. Injunctive Relief. I acknowledge that the Corporation’s remedies at law may be inadequate to protect the Corporation against any actual or threatened breach of the provisions of Section 1 or the conduct described in Section 3(a), and, therefore, without prejudice to any other rights and remedies otherwise available to the Corporation at law or in equity (including but not limited to, an action under Section 3(a)), the Corporation shall be entitled to injunctive relief in its favor and to specific performance without proof of actual damages and without the requirement of the posting of any bond or similar security.

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only with respect to the operation of this provision in the particular jurisdiction in which such adjudication is made.

6. Definitions. Capitalized terms not defined in this PECA have the meaning given to them in the Plan, as applicable. For purposes of this PECA, the following terms have the meanings given below:

(a) “Restricted Company” means The Boeing Company, General Dynamics Corporation, Northrop Grumman Corporation, Raytheon Technologies Corporation, Honeywell International Inc., BAE Systems Inc., L3Harris Technologies, Inc., Thales, Airbus Group, Inc., Textron Inc., Leonardo SpA, Leidos Holdings, Inc. and (i) any entity directly or indirectly controlling, controlled by, or under common control with any of the foregoing, and (ii) any successor to all or part of the business of any of the foregoing as a result of a merger, reorganization, consolidation, spin-off, split-up, acquisition, divestiture, or similar transaction, or as a result of a name change.

(i) with respect to the President and Chief Executive Officer, the Management Development and Compensation Committee of the Corporation’s Board of Directors;

(ii) with respect to an Elected Officer, the Corporation’s President and Chief Executive Officer; or

(iii) with respect to all other employees, the Senior Vice President, Human Resources of the Corporation.

(d) “Elected Officer” means an officer of the Corporation who was elected to their position by the Corporation’s Board of Directors.

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7. Miscellaneous.

(a) The Plan, the Award Agreement (with Exhibit B) and this PECA constitute the entire agreement governing the terms of the award of the LTIP to me.

(c) This PECA shall inure to the benefit of the Corporation’s successors and assigns, and may be assigned by the Corporation without my consent.

This PECA is effective as of the acceptance by me of the award of an LTIP under the Award Agreement and is not contingent on the vesting of the LTIP.

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Exhibit B

Stock Ownership Requirements


Title			Annual Base Pay Multiple

Chairman, President and Chief Executive Officer			6 times
Chief Operating Officer; Chief Financial Officer			4 times
Executive Vice Presidents			3 times
Senior Vice Presidents			2 times
Other Elected Officers			2 times
Other Vice Presidents			1 times

Satisfaction of Requirements

Covered employees may satisfy their ownership requirements with common stock in these categories:

•Shares owned directly.

•Shares owned by a spouse or a trust.

•Shares represented by monies invested in 401(k) Company Common Stock Funds or comparable plans.

•Share equivalents as represented by income deferred to the Company Stock Investment Option of the Deferred Management Incentive Compensation Plan (DMICP).

•Unvested Restricted Stock Units

Key employees will be required to achieve the appropriate ownership level within five years and are expected to make continuous progress toward their target. Appointment to a new level will reset the five-year requirement. Unexercised options prior to vesting are not counted toward meeting the guidelines.

Holding Period

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Covered employees are asked to report annually on their progress toward attainment of their share ownership goals.

Document

Exhibit 10.4

AMENDMENT TO OUTSTANDING LONG-TERM INCENTIVE PERFORMANCE AND PERFORMANCE STOCK UNIT AWARD AGREEMENTS UNDER THE

LOCKHEED MARTIN CORPORATION 2011 INCENTIVE PERFORMANCE AWARD PLAN AND

LOCKHEED MARTIN CORPORATION 2020 INCENTIVE PERFORMANCE AWARD PLAN

The Management Development and Compensation Committee (the “Committee”) of the Board of Directors of Lockheed Martin Corporation (the “Corporation”), as administrator of the Lockheed Martin Corporation 2011 Incentive Performance Award Plan, as amended (“2011 Plan”), and the Lockheed Martin Corporation 2020 Incentive Performance Award Plan (“2020 Plan” and, together with the 2011 Plan, the “Plans”), approved clarifying amendments to the terms of the outstanding, unvested long-term incentive performance awards and performance stock unit awards granted to employees under the Plans as set forth in the table below (each, an “Affected Agreement”). Effective as of February 24, 2021, each of the Affected Agreements shall be amended as provided for herein (this Amendment, the “Amendment”).


Affected Agreement			Applicable Plan
Long-Term Incentive Performance Award Agreement for the 2020 – 2022 Performance Period			2011 Plan
Performance Stock Unit Award Agreement for the 2020 – 2022 Performance Period			2011 Plan
Long-Term Incentive Performance Award Agreement for the 2020 – 2022 Performance Period			2020 Plan
Performance Stock Unit Award Agreement for the 2020 – 2022 Performance Period			2020 Plan

Capitalized terms used in this Amendment are defined in the 2011 Plan or 2020 Plan, as applicable, or the Affected Agreements.

1. The second sentence of Section 4.1(a) of the Affected Agreements is revised in its entirety to read as follows (new language underlined):

For any year in which net income would otherwise be affected by (I) Tax Reform; or (II) a change in law or interpretation of law related to the amortization of research or experimental expenditures under Section 174 of the Code, as amended from time to time, as reflected in any future Long Range Plan, financial statement or tax return, net income shall be adjusted by substituting the effective tax rate assumed in the 2020 Long Range Plan for the actual effective tax rate (and ignoring the adjustment under clause (A)(i) above, if any, to the extent necessary to avoid double counting of tax impacts).

2. In all other respects, the Affected Agreements will remain unchanged.

3. This Amendment is subject to the terms of the applicable Plan, and the applicable Plan is hereby incorporated by reference.

Document

Exhibit 15

Acknowledgment of

Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Lockheed Martin Corporation

We are aware of the incorporation by reference of our report dated April 21, 2021, relating to the unaudited consolidated interim financial statements of Lockheed Martin Corporation that is included in its Form 10-Q for the quarter ended March 28, 2021, in the following Registration Statements of Lockheed Martin Corporation:

•333-92363 on Form S-8, dated December 8, 1999;

•333-115357 on Form S-8, dated May 10, 2004;

•333-155687 on Form S-8, dated November 25, 2008;

•333-176440 on Form S-8, dated August 23, 2011 and April 24, 2020 (Post-Effective Amendment No. 1);

•333-188118 on Form S-8, dated April 25, 2013;

•333-195466 on Form S-8, dated April 24, 2014, July 23, 2014 (Post-Effective Amendment No.1) and April 24, 2020 (Post-Effective Amendment No. 2);

•333-237829, 333-237831, and 333-237832 on Form S-8, each dated April 24, 2020;

•333-237834 on Form S-3, dated April 24, 2020; and

•333-237836 on Form S-3, dated April 24, 2020.

/s/ Ernst & Young LLP

Tysons, Virginia

April 21, 2021

Document

Exhibit 31.1

CERTIFICATION OF JAMES D. TAICLET PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James D. Taiclet, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Lockheed Martin Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


						/s/ James D. Taiclet
						James D. Taiclet
						Chief Executive Officer
Date: April 21, 2021

Document

Exhibit 31.2

CERTIFICATION OF KENNETH R. POSSENRIEDE PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kenneth R. Possenriede, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Lockheed Martin Corporation;

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


						/s/ Kenneth R. Possenriede
						Kenneth R. Possenriede
						Chief Financial Officer
Date: April 21, 2021

Document

Exhibit 32

CERTIFICATION OF JAMES D. TAICLET AND KENNETH R. POSSENRIEDE PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Lockheed Martin Corporation (the “Corporation”) on Form 10-Q for the quarter ended March 28, 2021, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, James D. Taiclet, Chief Executive Officer of the Corporation, and I, Kenneth R. Possenriede, Chief Financial Officer of the Corporation, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.



			/s/ James D. Taiclet
			James D. Taiclet
			Chief Executive Officer

			/s/ Kenneth R. Possenriede
			Kenneth R. Possenriede
			Chief Financial Officer

Date: April 21, 2021