Lockheed Martin 2013 Annual Report Download - page 24

Acquisition, divestiture, venture, and investment transactions often require substantial management resources and have the
potential to divert our attention from our existing business. Unidentified pre-closing liabilities could affect our future
financial results.
Ventures or equity investments operate under shared control with other parties. Under the equity method of accounting
for nonconsolidated ventures and investments, we recognize our share of the operating profit of these ventures in our results
of operations. Our operating results may be affected by the performance of businesses over which we do not exercise control.
The most significant impact of our equity investments is in our Space Systems business segment where approximately 29%
of its 2013 operating profit was derived from its share of earnings from equity method investees.
Our business could be negatively affected by cyber or other security threats or other disruptions.
As a U.S. defense contractor, we face cyber threats, insider threats, threats to the physical security of our facilities and
employees, and terrorist acts, as well as the potential for business disruptions associated with information technology
failures, natural disasters, or public health crises.
We routinely experience cyber security threats, threats to our information technology infrastructure and unauthorized
attempts to gain access to our company sensitive information, as do our customers, suppliers, subcontractors and venture
partners. We may experience similar security threats at customer sites that we operate and manage as a contractual
requirement.
Prior cyber attacks directed at us have not had a material impact on our financial results, and we believe our threat
detection and mitigation processes and procedures are adequate. The threats we face vary from attacks common to most
industries to more advanced and persistent, highly organized adversaries who target us because we protect national security
information. If we are unable to protect sensitive information, our customers or governmental authorities could question the
adequacy of our threat mitigation and detection processes and procedures. Due to the evolving nature of these security
threats, however, the impact of any future incident cannot be predicted.
Although we work cooperatively with our customers, suppliers, subcontractors, venture partners, and acquisitions to
seek to minimize the impact of cyber threats, other security threats or business disruptions, we must rely on the safeguards
put in place by these entities, which may affect the security of our information. These entities have varying levels of cyber
security expertise and safeguards and their relationships with government contractors, such as Lockheed Martin, may
increase the likelihood that they are targeted by the same cyber threats we face.
The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other
means. Additionally, some cyber technologies we develop, particularly those related to homeland security, may raise
potential liabilities related to intellectual property and civil liberties, including privacy concerns, which may not be fully
insured or indemnified by other means. Occurrence of any of these events could adversely affect our internal operations, the
services we provide to our customers, our future financial results, our reputation or our stock price; or such events could
result in the loss of competitive advantages derived from our research and development efforts or other intellectual property,
early obsolescence of our products and services, or contractual penalties.
Environmental costs could affect our future earnings as well as the affordability of our products and services.
Our operations are subject to and affected by a variety of federal, state, local, and foreign environmental protection laws
and regulations. We are involved in environmental responses at some of our facilities and former facilities, and at third-party
sites not owned by us where we have been designated a potentially responsible party by the U.S. Environmental Protection
Agency or by a state agency. In addition, we could be affected by future regulations imposed in response to concerns over
climate change, other aspects of the environment, or natural resources. We have an ongoing comprehensive program to
reduce the effects of our operations on the environment.
We manage various government-owned facilities on behalf of the government. At such facilities, environmental
compliance and remediation costs historically have been the responsibility of the government, and we have relied, and
continue to rely with respect to past practices, upon government funding to pay such costs. Although the government remains
responsible for capital and operating costs associated with environmental compliance, responsibility for fines and penalties
associated with environmental noncompliance typically are borne by either the government or the contractor, depending on
the contract and the relevant facts. Some environmental laws include criminal provisions. An environmental law conviction
could affect our ability to be awarded future, or perform existing, U.S. Government contracts.
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