LOCKHEED MARTIN CORPORATION

Other areas of international expansion at our Aeronautics business segment include the F-16 and C-130J programs. In
2015, the Iraqi F-16 contract was definitized and production continues into 2017. Also, the award from Singapore in 2015 for
F-16 aircraft upgrades establishes work into 2023. The C-130J Super Hercules aircraft continued to draw interest from
various international customers in 2015.
Our MFC business segment produces the Patriot Advanced Capability-3 (PAC-3) and Terminal High Altitude Area
Defense (THAAD) air and missile defense systems, which continue to generate significant international interest. The PAC-3
is an advanced missile defense system designed to intercept incoming airborne threats. During 2015 we received orders for
PAC-3 systems from the Kingdom of Saudi Arabia and South Korea, in addition to the award we received in 2014 to provide
PAC-3 missile defense equipment to Qatar. THAAD international customers include the UAE. Other international customers
include Japan, Germany, the Netherlands, Taiwan and Kuwait. Other countries in the Middle East, Europe and the Asia-
Pacific region have also expressed interest in our air and missile defense systems. Additionally, we continue to see
international demand for our tactical missile and fire control products.
In our MST business segment, we continue to experience international interest in the Aegis Ballistic Missile Defense
System. We perform activities in the development, production, ship integration and test and lifetime support for ships of
international customers such as Japan, Spain, Korea and Australia. We have an ongoing program in Canada for combat
systems equipment upgrades on 13 Halifax-class frigates. In our training and logistics solutions portfolio, we have active
programs and pursuits in United Kingdom, Saudi Arabia, Canada, Singapore, Qatar, and Australia.
Our acquisition of Sikorsky adds a significant international component to the MST business segment with an installed
base of over 1,000 aircraft internationally. We have active development, production, and sustainment support of the UH-60
Black Hawk and MH-60 Seahawk aircraft to foreign military customers, including Australia, Denmark, Taiwan, Saudi
Arabia, and Colombia. The S-76 and S-92 aircraft is sold to commercial customers in the oil and gas industry, emergency
medical evacuation, and search and rescue fleets in over 30 countries, including customers and end-users in China, Japan,
Brazil, Saudi Arabia, the UAE, and the United Kingdom.
Status of the F-35 Program
The F-35 program consists of a development contracts, multiple production contracts and sustainment activities. The
development contracts are being performed concurrent with the production contracts. Concurrent performance of
development and production contracts is used for complex programs to test aircraft, shorten the time to field systems, and
achieve overall cost savings. We expect the System Development and Demonstration portion of the development contracts
will be substantially complete in 2017, with less significant efforts continuing into 2019. Production of the aircraft is
expected to continue for many years given the U.S. Government’s current inventory objective of 2,443 aircraft for the Air
Force, Marine Corps, and Navy; commitments from our eight international partners and three international customers; as
well as expressions of interest from other countries.
The U.S. Government continues to complete various operational tests, including ship trials, mission system evaluations,
and weapons testing, with the F-35 aircraft fleet recently surpassing 50,000 flight hours. Progress continues to be made on
the production of aircraft. In July 2015, the U.S. Marine Corps declared that the F-35B had reached initial operating
capability, which makes it the first variant available for combat. As of December 31, 2015, we have delivered 154 production
aircraft to our U.S. and international partners including delivery of the first Italian Final Assembly and Check-Out Facility
produced F-35, and have 114 production aircraft in backlog, including orders from our international partners.
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 partners’
oversight and budgeting processes. Current program challenges include, but are not limited to, supplier and partner
performance, software development, level of cost associated with life cycle operations and sustainment and warranties,
receiving funding for production contracts on a timely basis, executing future flight tests, findings resulting from testing, and
operating the aircraft.
Cybersecurity
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
32