Income Tax Accounting Policy
Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities, Classification
Analyst Adjustments: Removal of Deferred Taxes
Adjusted Ratios: Removal of Deferred Taxes (Summary)
Adjusted Current Ratio
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Lockheed Martin calculates the provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences that exist between the financial statement carrying amount of assets and liabilities and their respective tax bases, as well as from operating loss and tax credit carry-forwards. Lockheed Martin measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which Lockheed Martin expects the temporary differences to be recovered or paid.

Lockheed Martin periodically assesses the tax exposures related to periods that are open to examination. Based on the latest available information, Lockheed Martin evaluates the tax positions to determine whether the position will more likely than not be sustained upon examination by the Internal Revenue Service (IRS) or other taxing authorities. If Lockheed Martin cannot reach a more-likely-than-not determination, no benefit is recorded. If Lockheed Martin determines that the tax position is more likely than not to be sustained, Lockheed Martin records the largest amount of benefit that is more likely than not to be realized when the tax position is settled. Lockheed Martin records interest and penalties related to income taxes as a component of income tax expense on the consolidated statements of earnings. Interest and penalties were not material.

Source: 10-K (filing date: 2019-02-08).

Lockheed Martin Corp., income tax expense (benefit), continuing operations

US$ in millions

	12 months ended	Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
	Federal income tax expensee (benefit)
	Foreign income tax expense
	Current
	Federal income tax expense (benefit)
	Foreign income tax expense (benefit)
	Deferred
	Income tax expense

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

Item	Description	The company
Current	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	Lockheed Martin Corp.’s current declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.
Deferred	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	Lockheed Martin Corp.’s deferred increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level.
Income tax expense	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Lockheed Martin Corp.’s income tax expense increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Lockheed Martin Corp., effective income tax rate (EITR) reconciliation

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	U.S. federal statutory tax rate
	Research and development tax credit
	Foreign derived intangible income deduction
	Tax deductible dividends
	Excess tax benefits for share-based payment awards
	U.S. manufacturing deduction benefit
	Tax accounting method change
	Other, net
	Effective tax rate, before deferred tax write-down and transition tax
	Deferred tax write-down and transition tax
	Effective tax rate

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

Item	Description	The company
Effective tax rate, before deferred tax write-down and transition tax	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Lockheed Martin Corp.’s effective tax rate, before deferred tax write-down and transition tax increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Lockheed Martin Corp., components of deferred tax assets and liabilities

US$ in millions

		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
	Accrued compensation and benefits
	Pensions
	Other postretirement benefit obligations
	Contract accounting methods
	Foreign company operating losses and credits
	Other
	Deferred tax assets, gross
	Valuation allowance
	Deferred tax assets, net
	Goodwill and purchased intangibles
	Property, plant and equipment
	Exchanged debt securities and other
	Deferred tax liabilities
	Net deferred tax assets (liabilities)

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

Item	Description	The company
Deferred tax assets, gross	Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Lockheed Martin Corp.’s deferred tax assets, gross declined from 2016 to 2017 but then slightly increased from 2017 to 2018.
Deferred tax assets, net	Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Lockheed Martin Corp.’s deferred tax assets, net declined from 2016 to 2017 but then slightly increased from 2017 to 2018.
Net deferred tax assets (liabilities)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	Lockheed Martin Corp.’s net deferred tax assets (liabilities) declined from 2016 to 2017 but then slightly increased from 2017 to 2018.

Lockheed Martin Corp., deferred tax assets and liabilities, classification

US$ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Current deferred tax assets
	Noncurrent deferred tax assets
	Noncurrent deferred tax liabilities (included in Other noncurrent liabilities)

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

Item	Description	The company
Noncurrent deferred tax assets	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent.	Lockheed Martin Corp.’s noncurrent deferred tax assets declined from 2016 to 2017 but then slightly increased from 2017 to 2018.
Noncurrent deferred tax liabilities (included in Other noncurrent liabilities)	Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent.	Lockheed Martin Corp.’s noncurrent deferred tax liabilities (included in Other noncurrent liabilities) declined from 2016 to 2017 and from 2017 to 2018.

Lockheed Martin Corp., adjustments to financial data

US$ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Adjustment to Current Assets
	Current assets (as reported)
	Less: Current deferred tax assets, net
	Current assets (adjusted)
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Current deferred tax assets, net
	Less: Noncurrent deferred tax assets, net
	Total assets (adjusted)
	Adjustment to Total Liabilities
	Total liabilities (as reported)
	Less: Noncurrent deferred tax liabilities, net
	Total liabilities (adjusted)
	Adjustment to Stockholders’ Equity (deficit)
	Stockholders’ equity (deficit) (as reported)
	Less: Net deferred tax assets (liabilities)
	Stockholders’ equity (deficit) (adjusted)
	Adjustment to Net Earnings
	Net earnings (as reported)
	Add: Deferred income tax expense (benefit)
	Net earnings (adjusted)

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

Lockheed Martin Corp., Financial Data: Reported vs. Adjusted

Lockheed Martin Corp., adjusted ratios

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Current Ratio
	Reported current ratio
	Adjusted current ratio
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities.	Lockheed Martin Corp.’s adjusted current ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Lockheed Martin Corp.’s adjusted net profit margin deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Lockheed Martin Corp.’s adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Lockheed Martin Corp.’s adjusted ROA improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Lockheed Martin Corp., Ratios: Reported vs. Adjusted

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Current assets
	Current liabilities
	Ratio
	Current ratio¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted current assets
	Current liabilities
	Ratio
	Adjusted current ratio²

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

2018 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

² Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities.	Lockheed Martin Corp.’s adjusted current ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net earnings
	Net sales
	Ratio
	Net profit margin¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net earnings
	Net sales
	Ratio
	Adjusted net profit margin²

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

2018 Calculations

¹ Net profit margin = 100 × Net earnings ÷ Net sales
= 100 × hidden ÷ hidden = hidden

² Adjusted net profit margin = 100 × Adjusted net earnings ÷ Net sales
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Lockheed Martin Corp.’s adjusted net profit margin deteriorated from 2016 to 2017 and from 2017 to 2018.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net sales
	Total assets
	Ratio
	Total asset turnover¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Net sales
	Adjusted total assets
	Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

2018 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= hidden ÷ hidden = hidden

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Lockheed Martin Corp.’s adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Total assets
	Stockholders’ equity (deficit)
	Ratio
	Financial leverage¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted stockholders’ equity (deficit)
	Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

2018 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity (deficit)
= hidden ÷ hidden = hidden

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity (deficit)
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net earnings
	Stockholders’ equity (deficit)
	Ratio
	ROE¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net earnings
	Adjusted stockholders’ equity (deficit)
	Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

2018 Calculations

¹ ROE = 100 × Net earnings ÷ Stockholders’ equity (deficit)
= 100 × hidden ÷ hidden = hidden

² Adjusted ROE = 100 × Adjusted net earnings ÷ Adjusted stockholders’ equity (deficit)
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net earnings
	Total assets
	Ratio
	ROA¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net earnings
	Adjusted total assets
	Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

2018 Calculations

¹ ROA = 100 × Net earnings ÷ Total assets
= 100 × hidden ÷ hidden = hidden

² Adjusted ROA = 100 × Adjusted net earnings ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Lockheed Martin Corp.’s adjusted ROA improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

	Lockheed Martin Corp.	Other companies (not purchased previously)
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Discounted Cash Flow (DCF) Valuation
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Analysis
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Lockheed Martin Corp. (LMT)

Analysis of Income Taxes

Income Tax Accounting Policy

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Deferred Tax Assets and Liabilities, Classification

Analyst Adjustments: Removal of Deferred Taxes

Lockheed Martin Corp., Financial Data: Reported vs. Adjusted

Adjusted Ratios: Removal of Deferred Taxes (Summary)

Lockheed Martin Corp., Ratios: Reported vs. Adjusted

Adjusted Current Ratio

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)