Lockheed Martin 2011 Annual Report Download - page 22

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, 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 attempts to gain
access to our company sensitive information, as do our customers, suppliers, subcontractors and joint 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 robust. 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 and our suppliers, subcontractors, and joint venture partners to
seek to minimize the impacts of cyber threats, other security threats or business disruptions, we must rely on the safeguards
put in place by those entities.
The costs related to cyber or other security threats or disruptions 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
customers, loss of competitive advantages derived from our research and development efforts, early obsolescence of our
products and services, our future financial results, our reputation or our stock price.
Unforeseen 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 (EPA) 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, and by other actions commonly referred to as
“green initiatives.” 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.
We have incurred and will continue to incur liabilities under various federal, state, local, and foreign statutes for
environmental protection and remediation. The extent of our financial exposure cannot in all cases be reasonably estimated at
this time. Among the variables management must assess in evaluating costs associated with these cases and remediation sites
generally are the status of site assessment, extent of the contamination, impacts on natural resources, changing cost estimates,
evolution of technologies used to remediate the site, and continually evolving governmental environmental standards and
cost allowability issues. Both the EPA and the California Office of Environmental Health Hazard Assessment announced
plans in January 2011 to regulate two chemicals, perchlorate and hexavalent chromium, to levels in drinking water that are
expected to be substantially lower than the existing public health goals or standards established in California. The rulemaking
process is a lengthy one that takes one or more years to complete. If a substantially lower standard is adopted, we would
expect a material increase in our cost estimates for remediation at several existing sites. For information regarding these
matters, including current estimates of the amounts that we believe are required for remediation or cleanup to the extent
probable and estimable, see “Critical Accounting Policies—Environmental Matters” in Management’s Discussion and
Analysis of Financial Condition and Results of Operations and Note 13—Legal Proceedings, Commitments, and
Contingencies.
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