FINANCIAL HIGHLIGHTS In millions, except per share data 2018 2017 2016 Net Sales $53,762 $49,960 $47,290 Segment Operating Profit 5,877 5,092 4,982 Consolidated Operating Profit 7,334 6,744 5,888 Net Earnings From Continuing Operations 5,046 1,890 3,661 Net Earnings 5,046 1,963 5,173 Diluted Earnings Per Common Share Continuing Operations 17.59 6.50 12.08 Net Earnings 17.59 6.75 17.07 Cash Dividends Per Common Share 8.20 7.46 6.77 Average Diluted Common Shares Outstanding 287 291 303 Cash and Cash Equivalents $772$ 2,861 $ 1,837 Total Assets 44,876 46,620 47,560 Total Debt, net 14,104 14,263 14,282 Total Equity (Deficit) 1,449 (776) 1,477 Common Shares Outstanding at Year-End 281 284 289 Net Cash Provided by Operating Activities $3,138 $ 6,476 $ 5,189 NOTE: For additional information regarding the amounts presented above, see the Form 10-K portion of this Annual Report. A reconciliation of Segment Operating Profit to Consolidated Operating Profit is included on the page preceding the back cover of this Annual Report. On the Cover: F-35B Lightning II On September 29, 2018, the first F-35B Lightning II stealth fighters landed on the flight deck of HMS Queen Elizabeth, as Britain’s newest Royal Navy aircraft carrier conducted trials off the Eastern Seaboard of the United States. These developmental trials included more than 500 take-offs and landings from the warship over an 11-week period. The F-35B is one of three variants of the world’s most advanced supersonic fifth-generation fighter jet. Lockheed Martin has delivered F-35Bs to the United States Marine Corps, the United Kingdom Royal Air Force and Royal Navy, and the Italian Air Force. Dear Fellow Stockholders: In 2018, Lockheed Martin led the way in aerospace and defense – protecting lives, advancing scientific discovery, and pushing the boundaries of innovation. In a year that presented a range of dynamic geopolitical challenges in a highly competitive business environment, we focused on our customers and supported their vital missions. As a result of this attention to our customers, our consistent teamwork, and our exceptional performance, we produced outstanding financial, operational, and strategic results in 2018. We grew our business and expanded our impact in the United States and around the world. In addition, our impressive and sustained performance helped us provide long-term value for our shareholders – with strong earnings and record new orders and backlog. Each of our business areas contributed to the strong performance, as we produced innovative and affordable solutions across our portfolio. At Aeronautics, we continued to deliver the world’s most Marillyn A. Hewson, Chairman, President and Chief Executive Officer advanced aircraft to customers across the globe. At Missiles and Fire Control, the demand for our integrated air-and- missile defense systems and tactical missiles increased, as nations sought to defend their citizens from growing threats. At Rotary and Mission Systems, we further solidified our position as a global leader in rotorcraft technology, sensors, radar systems, combat simulation and training, and advanced cybersecurity. And at Space, we continued to define the leading edge of military, civil, and commercial technology on the final frontier. Throughout 2018, we delivered for our customers and shareholders and we continued to lay a solid foundation for future success and future growth. STRONG FINANCIAL RESULTS BASED ON OUTSTANDING PERFORMANCE Our consistent performance across our diverse portfolio was reflected in our financial results. Here are some key financial metrics that reflect our strong and consistent operational performance in 2018: • Record orders of $79.0 billion, leading to a record backlog of $130.5 billion • Sales of $53.8 billion, up 8 percent versus 2017 • Segment operating profit* of $5.9 billion, up 15 percent versus 2017 • Segment margin* of 10.9 percent • Net earnings of approximately $5.0 billion • Diluted earnings per share of $17.59 I 2018 Annual Report Our Leadership Team (from left to right): Frank A. St. John, Executive Vice President, Missiles and Fire Control; Richard F. Ambrose, Executive Vice President, Space; Bruce L. Tanner, Executive Vice President and Chief Financial Officer; Marillyn A. Hewson, Chairman, President and Chief Executive Officer; Dale P. Bennett, Executive Vice President, Rotary and Mission Systems; Michele A. Evans, Executive Vice President, Aeronautics; Richard H. Edwards, Executive Vice President, Lockheed Martin International; and Kenneth R. Possenriede, who has been elected Executive Vice President and Chief Financial Officer, effective February 11, 2019, succeeding Bruce L. Tanner, who is retiring from the company later in 2019. We generated $3.1 billion in cash from operations in We seek to engage our customers directly, so we can 2018, after pension contributions of $5.0 billion. And listen to their needs and serve them well – today and we returned about $3.8 billion of our available cash tomorrow. In 2018, we continued to strengthen our flow to stockholders throughout the year. relationships with elected leaders, policy makers, and government officials. In an election year that brought We paid cash dividends of $2.3 billion and increased change to Washington, D.C., and to many U.S. state the quarterly dividend by 10 percent in the third capitals, we continued to work with both parties on quarter to $2.20 per share or $8.80 per share annually. issues of national security and economic development. Our 4.7 million share repurchases for 2018 totaled Our ongoing outreach and dialogue helped reinforce $1.5 billion. We also increased the share repurchase the critical role of our products, programs, and authority and authorized the use of accelerated share capabilities in protecting citizens, creating jobs, repurchase plans to provide flexibility for future and driving economic growth. Reflecting this, the returns. federal budget and congressional spending decisions supported key Lockheed Martin programs. AN ENDURING COMMITMENT As we listen to and serve our customers, we do so TO CUSTOMERS with a commitment to help position them for the challenges in the years ahead. Our performance results At Lockheed Martin, our business achievements and reflect our focus on their evolving needs and our our sustained performance are built on putting our ability to anticipate, adapt, and innovate, so that our customers at the center of everything we do. customers can maintain their technological advantage far into the future. Lockheed Martin Corporation II Delivering Game-Changing Jet Fighters In addition, we are working with the U.S. Air Force to modernize the only other fifth-generation fighter in the At Aeronautics, we are delivering the most advanced world, the F-22 Raptor. We are adding new capabilities, aircraft and aviation technologies in the world. upgrading the performance of its weapons systems, and providing improved sustainment, support, and Nowhere is this leadership seen more clearly than supply-chain management to ensure the F-22 is a force in the growth and impact of our globe-spanning for air dominance for decades to come. F-35 program. The Bright Future for F-16s and Air Mobility Nations around the world are seeing the game- changing capabilities of the F-35. In 2018, the The iconic F-16 fighter continues to find new revolutionary fighter was used in combat for the first customers. In 2018, Bahrain ordered 16 new F-16s. time – by the Israeli Air Force and the U.S. Marine Slovakia also agreed to purchase 14 new F-16 aircraft Corps. With its stealth, range, and sensor-fusion to replace its Russian-made MiG-29 jets. And Bulgaria’s capabilities, the fifth-generation F-35 is increasingly Ministry of Defense recommended the F-16 Block 70 seen as a force multiplier that makes every branch of a for the nation’s air force. nation’s military more integrated and more effective. We continue to see strong demand for the C-130J In 2018, the program celebrated several international Super Hercules. The transport aircraft now serves milestones. We stood with officials from Australia, 20 nations, with Germany the most recent addition. Japan, and the United Kingdom as each marked the We delivered a total of 25 C-130Js in 2018 – and hit home basing of their first F-35s. Our company also a company milestone with one of those 25 being our rolled off the assembly line the first F-35s for South 400th delivery. Korea and Turkey. And in 2018, Belgium chose the F-35 as its fighter of the future. We also marked the 50th year of service for the C-5, which is operated solely by the U.S. Air Force. We To meet our strong backlog of orders, we continue delivered four C-5M Super Galaxy strategic transport to successfully ramp up production. We met our aircraft that we modernized under the USAF’s production targets for 2018, delivering 91 aircraft – Reliability Enhancement and Re-engining Program nearly a 40 percent increase over 2017. (RERP). Our final delivery of the 52nd C-5M during the year completed the RERP upgrade, which extends the In 2018, we also made bold moves to reshape our service life of the C-5 fleet out until the 2040s. operations and prepare for higher production in the years to come. We opened a new 65,000-square-foot Air-and-Missile Defense and Precision Targeting parts manufacturing plant in Pinellas Park, Florida. We expanded our facility in Johnstown, Pennsylvania, to Missiles and Fire Control continued to develop and provide component final finish work. And we shifted implement the technologies that help countries keep F-16 production to Greenville, South Carolina, to better their citizens safe.