LOCKHEED MARTIN CORPORATION

the price of our products and services under our contracts with the U.S. Government. For information regarding these
matters, including current estimates of the amounts that we believe are required for remediation or cleanup to the extent that
they are probable and estimable, see “Critical Accounting Policies – Environmental Matters” in Management’s Discussion
and Analysis of Financial Condition and Results of Operations and “Note 14 – Legal Proceedings, Commitments and
Contingencies” of our consolidated financial statements. See also the discussion of environmental matters within Section
1A – Risk Factors.
Backlog
At December 31, 2015, our backlog was $99.6 billion compared with $80.5 billion at December 31, 2014. Backlog at
December 31, 2015 includes $15.6 billion related to Sikorsky and $4.8 billion related to our IS&GS business segment, which
we plan to divest in 2016. Sikorsky backlog may change as we complete our acquired backlog analysis. Backlog is converted
into sales in future periods as work is performed or deliveries are made. Approximately $43.0 billion, or 43%, of our backlog
at December 31, 2015 is expected to be converted into sales in 2016.
Our backlog includes both funded (firm orders for our products and services for which funding has been both authorized
and appropriated by the customer – Congress, in the case of U.S. Government agencies) and unfunded (firm orders for which
funding has not been appropriated) amounts. We do not include unexercised options or potential orders under indefinitedelivery,
indefinite-quantity agreements in our backlog. If any of our contracts with firm orders were to be terminated, our
backlog would be reduced by the expected value of the unfilled orders of such contracts. Our backlog would also be reduced
in connection with the planned divestiture of our IS&GS business segment. Funded backlog was $70.7 billion at
December 31, 2015, as compared to $56.5 billion at December 31, 2014. For backlog related to each of our business
segments, see “Business Segment Results of Operations” in Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
Research and Development
We conduct research and development (R&D) activities under customer-sponsored contracts and with our own
independent R&D funds. Our independent R&D costs include basic research, applied research, development, systems and
other concept formulation studies. Generally, these costs are allocated among all contracts and programs in progress under
U.S. Government contractual arrangements. Costs we incur under customer-sponsored R&D programs pursuant to contracts
are included in net sales and cost of sales. Under certain arrangements in which a customer shares in product development
costs, our portion of the unreimbursed costs is expensed as incurred in cost of sales. Independent R&D costs charged to cost
of sales were $839 million in 2015, $751 million in 2014, and $697 million in 2013. See “Research and development and
similar costs” in “Note 1 – Significant Accounting Policies” of our consolidated financial statements.
Employees
At December 31, 2015, we had approximately 126,000 employees, about 93% of whom were located in the U.S.
Approximately 18% of our employees are covered by collective bargaining agreements with various unions. A number of our
existing collective bargaining agreements expire in any given year. Historically, we have been successful in negotiating
renewals to expiring agreements without any material disruption of operating activities. Management considers employee
relations to be good.
Available Information
We are a Maryland corporation formed in 1995 by combining the businesses of Lockheed Corporation and Martin
Marietta Corporation. Our principal executive offices are located at 6801 Rockledge Drive, Bethesda, Maryland 20817. Our
telephone number is (301) 897-6000 and our website home page is at www.lockheedmartin.com. We make our website
content available for information purposes only. It should not be relied upon for investment purposes, nor is it incorporated
by reference into this Annual Report on Form 10-K (Form 10-K).
Throughout this Form 10-K, we incorporate by reference information from parts of other documents filed with the U.S.
Securities and Exchange Commission (SEC). The SEC allows us to disclose important information by referring to it in this
manner.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements for
our annual stockholders’ meetings and amendments to those reports are available free of charge on our website,
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