Lockheed Martin 2015 Annual Report Download - page 24

Our business could be negatively affected by cyber or other security threats or other disruptions.
We routinely experience cybersecurity 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 cyberattacks 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, 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 cybersecurity
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.
On July 9, 2015, the U.S. Office of Personnel Management (OPM) announced that the background investigation records
of 21.5 million current, former and prospective Federal employees and contractors had been compromised as a result of a
cyber-security incident. Many of our current as well as former employees were the subjects of background investigations in
connection with former government service or as part of the screening process for a security clearance. We are currently
assessing the impact of this cyber-security incident but do not yet know the impact, if any, on Lockheed Martin or our current
or former employees.
The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other
means. Additionally, some cyber technologies we develop under contract for our customers, particularly those related to
homeland security, may raise potential liabilities related to intellectual property and civil liberties, including privacy
concerns, which may not be fully insured or indemnified by other means. 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. Additionally, 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.
If we fail to manage acquisitions, divestitures, equity investments and other transactions successfully or if acquired
entities or equity investments fail to perform as expected, our financial results, business and future prospects could be
harmed.
In pursuing our business strategy, we routinely conduct discussions, evaluate companies, and enter into agreements
regarding possible acquisitions, divestitures, ventures and equity investments. We seek to identify acquisition or investment
opportunities that will expand or complement our existing products and services or customer base, at attractive valuations.
We often compete with others for the same opportunities. To be successful, we must conduct due diligence to identify
valuation issues and potential loss contingencies; negotiate transaction terms; complete and close complex transactions;
integrate acquired companies and employees; and realize anticipated operating synergies efficiently and effectively.
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, particularly successor liability under procurement laws and regulations such as the False Claims Act or
Truth in Negotiations Act, anti-corruption, tax, import-export and technology transfer laws which provide for civil and
criminal penalties and the potential for debarment. We also may incur unanticipated costs or expenses, including post-closing
asset impairment charges, expenses associated with eliminating duplicate facilities, employee retention, transaction-related or
other litigation, and other liabilities. Any of the foregoing could adversely affect our business and results of operations.
Ventures, or non-controlling 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 and which face many of the same risks and uncertainties as we do. The most significant impact of our
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