Unassociated Document

BETHESDA, Md. July 27, 2010 – Lockheed Martin Corporation (NYSE: LMT) today reported second quarter 2010 net sales of $11.4 billion, a 3 percent increase over the $11.1 billion in 2009. Earnings from continuing operations for the second quarter of 2010 were $727 million, or $1.96 per diluted share, compared to $731 million, or $1.87 per diluted share, in 2009. Cash from operations in the second quarter of 2010 was $1.2 billion, compared to $1.1 billion in 2009.

“We had strong second quarter financial results,” said Chairman and CEO Bob Stevens. “Operationally, we’re continuing to implement affordability initiatives that will enhance performance and lower cost, and our dedicated workforce is focused on meeting our commitments. Strategically, we decided to divest two units and realign others to strengthen performance over the long term. In the new reality of escalating demands and increasing constraints on resources, we continue to refine our portfolio of capabilities and services to provide the best, most affordable solutions for our customers, a secure future for our employees and value for our shareholders.”

Realignment and Planned Divestitures

As previously announced on June 2, 2010, we have taken certain portfolio-shaping actions designed to strengthen our business over the long term, as follows:

·	Disclosed plans to divest most of Enterprise Integration Group (EIG) and Pacific Architects and Engineers, Inc. (PAE), two businesses within Information Systems & Global Solutions (IS&GS); and

·	Realigned two IS&GS businesses, Readiness & Stability Operations (RSO) and Savi Technology, Inc., with our Simulation, Training and Support business to form the Global Training & Logistics (GT&L) line of business within Electronic Systems.

We are actively marketing PAE for sale and expect the transaction to occur around the end of 2010. As a result, PAE’s operating results are included in discontinued operations and its assets and liabilities are classified as held for sale on the balance sheet. The plan to divest PAE is a result of customers seeking a different mix of services that do not fit with our long-term strategy.

We are currently evaluating the relative merits of a sale transaction for EIG compared to a spin-off of the EIG business to our stockholders. EIG’s financial results will remain in IS&GS’ continuing operations until we either conclude that a sale is probable or close a spin-off transaction. We expect a transaction to occur around the end of 2010.

Our decision to divest EIG was based on our analysis of the U.S. Government’s increased concerns about perceived organizational conflicts of interest within the defense contracting community. We have never had an organizational conflict of interest violation; however, the potential for conflicts arises in circumstances where a contractor providing certain types of advisory services or support to the U.S. Government is also involved in systems development activities. EIG provides systems engineering, architecture, and integration services and support to a broad range of government customers.

REPORTED RESULTS	2nd Quarter						Year-to-Date
(In millions, except per share data)	2010			2009			2010			2009

Net sales	$	11,442		$	11,072		$	21,915		$	21,280

Operating profit
Segment operating profit	$	1,287		$	1,272		$	2,435		$	2,466
Unallocated corporate, net:
FAS/CAS pension adjustment		(110	)		(115	)		(220	)		(229	)
Stock compensation expense		(41	)		(42	)		(82	)		(72	)
Other, net		(1	)		(37	)		(26	)		(35	)
Operating profit		1,135			1,078			2,107			2,130
Interest expense		86			74			173			148
Other non-operating income
(expense), net1		(19	)		46			9			43
Earnings from continuing operations before income taxes		1,030			1,050			1,943			2,025
Income tax expense2		303			319			675			628
Net earnings:
Earnings from continuing operations		727			731			1,268			1,397
Earnings from discontinued operations 3		98			3			104			3
Net earnings	$	825		$	734		$	1,372		$	1,400
Diluted earnings per share:
Continuing operations	$	1.96		$	1.87		$	3.38		$	3.54
Discontinued operations		0.26			0.01			0.28			0.01
Diluted earnings per share	$	2.22		$	1.88		$	3.66		$	3.55

Cash from operations	$	1,225		$	1,136		$	2,874		$	2,354

1	Includes interest income and unrealized gains (losses), net on marketable securities held in a Rabbi Trust to fund certain employee benefit obligations.

2	The 2010 year-to-date amount includes an unusual charge resulting from legislation that eliminates the tax deduction for benefit costs reimbursed under Medicare Part D, which increased income tax expense by $96 million.
3	The 2010 2nd quarter and year-to-date amounts include a $96 million tax benefit due to the recognition of a deferred tax asset for PAE book and tax differences recorded when the decision was made to dispose of PAE.

2010 FINANCIAL OUTLOOK 1	2010 Projections
(In millions, except per share data and percentages)	April 2010	Current Update

Net sales	$46,250 - $47,250	$45,500 - $46,500

Operating profit:
Segment operating profit	$5,025 - $5,125	$5,025 - $5,125
Unallocated corporate expense, net:
FAS/CAS pension adjustment	(440)	(440)
Stock compensation expense	(170)	(170)
Other, net	(120)	(100)
Operating profit	4,295 - 4,395	4,315 - 4,415

Interest expense	(350)	(350)
Other non-operating income, net	30	10
Earnings from continuing operations before income taxes	$3,975 - $4,075	$3,975 - $4,075

Diluted earnings per share from continuing operations	$7.00 - $7.20	$7.15 - $7.35
Cash from operations	≥ $3,300	≥ $3,400
ROIC2	≥ 16.0%	≥ 17.0%

1	All amounts approximate.

2	See discussion of non-GAAP performance measures at the end of this document.

The Corporation’s updated outlook for 2010 net sales, diluted earnings per share, and cash from operations incorporates: the removal of $750 million in projected net sales and $30 million in projected segment operating profit relating to PAE discontinued operations; a $30 million increase in projected segment operating profit driven by improved performance within Space Systems; and a net $0.15 per share improvement primarily due to a reduction in projected weighted average shares outstanding as a result of higher than anticipated share repurchase activity during the second quarter.

Our outlook for 2010 cash from operations anticipates that we will make at least $1.4 billion in discretionary contributions to our pension trust during 2010. We have made discretionary contributions of $350 million to our pension trusts through June 2010. We anticipate recovering approximately $1.0 billion as CAS cost during 2010, with the remainder being recoverable in future years.

Our outlook does not include any financial effect of the voluntary executive separation program announced on July 6, 2010 as the financial results of the program will not be known until later in 2010. Our outlook also does not incorporate any financial effect related to the research and development (R&D) tax credit, which expired on Dec. 31, 2009. The R&D tax credit benefit will not be incorporated into our 2010 outlook or results unless it is extended by Congress. The benefit of the R&D tax credit was approximately $0.11 per share for 2009.

Cash Deployment Strategy

We continued to execute our cash deployment strategy in the second quarter of 2010 by:

·	repurchasing 9.7 million shares at a cost of $782 million in the quarter and 16.2 million shares at a cost of $1.3 billion for the year-to-date period;

·	paying cash dividends totaling $233 million in the quarter and $471 million for the year-to-date period; and

·	expending capital of $131 million during the quarter and $223 million during the first six months of the year.

In May 2010, we issued $728 million of new 5.72 percent Notes due 2040 (the New Notes), in exchange for $611 million of our then outstanding debt securities (the Old Notes). We paid a premium of $158 million, of which $117 million was in the form of New Notes and $41 million was paid in cash. The premium will be amortized to interest expense over the life of the New Notes.

Segment Results

The Corporation operates in four principal business segments: Aeronautics; Electronic Systems; IS&GS; and Space Systems.

The segment results and discussions that follow reflect the previously discussed realignment between the Electronic Systems and IS&GS business segments as well as the exclusion of PAE from IS&GS as discontinued operations. EIG results continue to be included in the continuing operations of IS&GS.

Operating profit for the business segments includes equity earnings (losses) from their investments, because the operating activities of the investees are closely aligned with the operations of those segments. Our largest equity investments are United Launch Alliance (ULA) and United Space Alliance (USA), both of which are part of Space Systems.

The following table presents the operating results of the four business segments and reconciles these amounts to the Corporation’s consolidated financial results.

(In millions)	2nd Quarter						Year-to-Date
	2010			2009			2010			2009
Net sales
Aeronautics	$	3,146		$	3,086		$	6,079		$	5,867
Electronic Systems		3,528			3,395			6,804			6,564
Information Systems & Global Solutions		2,688			2,535			5,034			4,875
Space Systems		2,080			2,056			3,998			3,974
Total net sales	$	11,442		$	11,072		$	21,915		$	21,280

Operating profit
Aeronautics	$	372		$	399		$	696		$	754
Electronic Systems		432			425			836			825
Information Systems & Global Solutions		238			224			445			451
Space Systems		245			224			458			436
Segment operating profit		1,287			1,272			2,435			2,466
Unallocated corporate income (expense), net		(152	)		(194	)		(328	)		(336	)
Total operating profit	$	1,135		$	1,078		$	2,107		$	2,130

In our discussion of comparative results, changes in net sales and operating profit generally are expressed in terms of volume and performance.

Volume refers to increases or decreases in sales resulting from varying production activity levels, deliveries, or service levels on individual contracts. Volume changes typically include a corresponding change in operating profit based on the estimated profit rate at completion for a particular contract for design, development and production activities.

Performance generally refers to changes in contract profit booking rates. These changes to our contracts for products usually relate to profit recognition associated with revisions to total estimated costs at completion of the contracts that reflect improved (or deteriorated) operating or award fee performance on a particular contract. Changes in contract profit booking rates on contracts for products are recognized by recording adjustments in the current period for the inception-to-date effect of the changes on current and prior periods. Recognition of the inception-to-date adjustment in the current or prior periods may affect the comparison of segment operating results.

($ millions)	2nd Quarter						Year-to-Date
	2010			2009			2010			2009
Net sales	$	3,146		$	3,086		$	6,079		$	5,867
Operating profit	$	372		$	399		$	696		$	754
Operating margin		11.8	%		12.9	%		11.4	%		12.9	%

Net sales for Aeronautics increased by 2 percent for the quarter and 4 percent for the first six months of 2010 from the comparable 2009 periods. In both periods, sales increased in Air Mobility and declined in Combat Aircraft. The increase in Air Mobility primarily was attributable to higher volume on C-130J programs including deliveries and support activities. There were six C-130J deliveries in the second quarter of 2010 (compared to three in the second quarter of 2009) and nine in the first six months of 2010 (compared to six in the comparable period of 2009). The decrease in Combat Aircraft principally was due to lower volume on the F-35 System Development and Demonstration (SDD) contract, F-16 programs, including a decline in deliveries, as well as lower volume on F-22 and other combat aircraft programs. These decreases partially were offset by higher volume on the F-35 production contracts. There were five F-16 deliveries in the second quarter of 2010 (compared to eight in the second quarter of 2009) and 11 in the first six months of 2010 (compared to 16 in the comparable period of 2009). Other Aeronautics Programs sales were relatively unchanged between periods.

Operating profit for Aeronautics decreased by 7 percent for the quarter and 8 percent for the first six months of 2010 from the comparable 2009 periods. In both periods, the decline in operating profit primarily was due to decreases in Combat Aircraft, which partially were offset by increases in Air Mobility and Other Aeronautics Programs. The decrease in Combat Aircraft’s operating profit primarily was due to the lower volume on the F-35 SDD contract, F-16 and F-22 programs as well as a decrease in the level of favorable performance adjustments on other combat aircraft programs in 2010 compared to 2009. These decreases more than offset increased operating profit resulting from higher volume and improved performance on F-35 production contracts. The increase in Air Mobility operating profit primarily was due to the higher volume on C-130J and other air mobility programs. The increase in Other Aeronautics Programs mainly was attributable to improved performance in sustainment activities and higher volume and improved performance on P-3 programs.

Net sales for Electronic Systems increased by 4 percent for the quarter and first six months of 2010 from the comparable 2009 periods. In both periods, sales increased in GT&L and Missiles & Fire Control (M&FC) but declined in Mission Systems & Sensors (MS2). The increase at GT&L primarily was due to growth on readiness and stability operations and higher volume on simulation & training programs. The increase at M&FC primarily was due to higher volume on air defense and certain tactical missile programs, which partially were offset in the six month period by lower volume on fire control systems. The decrease at MS2 mainly was due to lower volume on ship & aviation systems and undersea warfare programs, which partially were offset by higher volume on surface naval warfare and radar system programs.

Operating profit for Electronic Systems increased by 2 percent for the quarter and 1 percent for the first six months of 2010 from the comparable 2009 periods. During the quarter, operating profit increased at M&FC and GT&L but declined at MS2. The increase at M&FC mainly was due to higher volume and improved performance on certain tactical missile programs and improved performance on fire control systems, which partially were offset by declines on air defense programs. The increase at GT&L primarily was attributable to higher volume on readiness and stability operations, which partially were offset by lower profitability on certain simulation & training programs in 2010. The decrease at MS2 primarily was attributable to lower volume and performance on undersea warfare system programs and lower volume on ship & aviation system programs, which partially were offset by higher volume and improved performance on radar system programs in 2010.

During the first six months of the year, operating profit increased at M&FC and GT&L but declined at MS2. The increase at M&FC mainly was due to higher volume and improved performance on certain tactical missile programs and higher volume on air defense programs. The increase at GT&L primarily was attributable to higher volume on readiness and stability operations, which partially were offset by the absence in 2010 of a benefit recognized in the first quarter of 2009 from favorably resolving a contract matter at simulation & training programs. The decrease at MS2 primarily was attributable to lower volume and performance on undersea warfare system programs, which partially were offset by higher volume and improved performance on radar system programs in 2010.

Net sales for IS&GS increased by 6 percent for the quarter and 3 percent for the first six months of 2010 from the comparable 2009 periods. In both periods, sales increased in Civil but declined in Defense and Intelligence. Civil increased principally due to higher volume on enterprise civilian services. Defense sales primarily decreased due to lower volume on mission and combat systems activities. Sales in Intelligence programs declined slightly mainly due to lower volume on security solutions, which partially were offset by higher volume in enterprise integration activities.

Operating profit for IS&GS increased by 6 percent for the quarter and decreased by 1 percent in the first six months of 2010 from the comparable 2009 periods. During the second quarter, operating profit increased in Intelligence and Civil but declined in Defense. The increase in Intelligence programs mainly was due to improved performance on security solutions, enterprise integration activities and other intelligence activities. The increase in Civil was mainly due to higher volume on enterprise civilian services. The decrease in operating profit at Defense primarily was attributable to lower volume on mission and combat systems activities.

During the first six months of the year, operating profit increases in Civil and Intelligence were more than offset by a decline in Defense. The increase in Civil was mainly due to higher volume on enterprise civilian services. The increase in Intelligence programs mainly was due to higher volume and improved performance on enterprise integration and other intelligence activities. The decrease in operating profit at Defense primarily was attributable to lower volume on mission and combat systems activities.

Net sales for Space Systems increased by 1 percent for the quarter and first six months of 2010 from the comparable 2009 periods. In both periods, sales growth at Satellites and Space Transportation partially were offset by declines in Strategic & Defensive Missile Systems (S&DMS). The sales growth in Satellites primarily was attributable to higher volume in government satellite activities. There were no commercial satellite deliveries during the second quarter and first six months of 2010 or 2009. The increase in Space Transportation principally was due to higher volume on the Orion program, which partially was offset by lower volume on the space shuttle external tank program. S&DMS sales decreased mainly due to lower volume on defensive missile and strategic missile programs.

Operating profit for Space Systems increased by 9 percent for the quarter and 5 percent for the first six months of 2010 from the comparable 2009 periods. Operating profit increased in all three lines of business during the quarter. The increase in Space Transportation mainly was attributable to higher volume on the Orion program, which partially was offset by lower volume on the space shuttle’s external tank program. Satellites’ operating profit increased primarily due to higher volume and improved performance on government satellite programs, which partially was offset by performance on commercial satellite programs. S&DMS operating profit increased mainly due to improved performance on strategic missile programs. Equity earnings represented 26 percent of operating profit at Space Systems in the second quarter of 2010, compared to 28 percent in the second quarter of 2009.

During the first six months of the year, operating profit increases in Space Transportation and S&DMS partially were offset by a decline in Satellites’ operating profit. The increase in Space Transportation mainly was attributable to higher equity earnings on the ULA joint venture and higher volume on the Orion program, which partially were offset by lower volume on the space shuttle’s external tank program. Satellites’ operating profit decreased primarily due to performance on commercial satellite programs and a lower level of favorable performance adjustments on government satellite programs in 2010 as compared to 2009. S&DMS operating profit increased mainly due to improved performance on strategic missile and defensive missile programs. Equity earnings represented 25 percent of operating profit at Space Systems in the first six months of 2010, compared to 22 percent in the first six months of 2009.

Income Taxes

Our effective income tax rates were 29.4 percent and 34.7 percent for the quarter and six months ended June 27, 2010 compared to 30.4 percent and 31.0 percent for the quarter and six months ended June 28, 2009. The effective tax rate for the second quarter of 2010 was lower than the comparable period in 2009 primarily due to a reduction in our provision for foreign taxes. The effective tax rate for the first six months of 2010 was higher than the comparable period in 2009 primarily due to the enactment of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. These Acts eliminated our tax deduction for company-paid retiree prescription drug expenses to the extent they are reimbursed under Medicare Part D, beginning in 2013. Since the tax benefits associated with these future deductions were reflected as deferred tax assets in our 2009 financial statements, the elimination of the tax deductions resulted in a reduction in deferred tax assets and an increase in income tax expense in the first quarter of 2010. This increase in income tax expense reduced 2010 net earnings by $96 million.

The effective tax rates for both periods included tax benefits for U.S. manufacturing activities and dividends related to our employee stock ownership plans. The second quarter and first six months of 2009 tax rates included benefits related to the R&D credit, which expired on Dec. 31, 2009.

Discontinued Operations

Discontinued operations includes the operating results for PAE for all periods presented and a $96 million tax benefit in 2010 due to the recognition of a deferred tax asset for PAE book and tax differences recorded when the decision was made to dispose of PAE.

FORWARD-LOOKING STATEMENTS

Statements in this release that are "forward-looking statements" are based on Lockheed Martin’s current expectations and assumptions. Forward-looking statements in this release include estimates of future sales, earnings and cash flow. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results could differ materially due to factors such as:

·	the availability of government funding for our products and services both domestically and internationally due to performance, cost growth, or other factors;

·	changes in government and customer priorities and requirements (including changes to respond to the priorities of Congress and the Administration, budgetary constraints, and cost-cutting initiatives);

·	the impact of economic recovery and stimulus plans and continued military operations in Iraq and Afghanistan on funding for existing defense programs;

·	failure to have key programs recertified after notice of exceeding cost-growth thresholds specified by the Nunn-McCurdy process;

·	the award or termination of contracts;

·	actual returns (or losses) on pension plan assets, interest and discount rates and other changes that may affect pension plan assumptions;

·	the effect of capitalization changes (such as share repurchase activity, advance pension funding, option exercises, or debt levels) on earnings per share;

·	difficulties in developing and producing operationally advanced technology systems;

·	the timing and customer acceptance of product deliveries;

·	materials availability and performance by key suppliers, subcontractors and customers;

·	charges from any future impairment reviews that may result in the recognition of losses and a reduction in the book value of goodwill or other long-term assets;

·	the future impact of legislation, rulemaking, and changes in accounting, tax, defense procurement, or export policies;

·	the future impact of acquisitions or divestitures, joint ventures or teaming arrangements; including the potential that a delay in the divestiture of EIG could result in U.S. Government customers electing not to renew existing or award new contracts to EIG;

·	the outcome of legal proceedings and other contingencies (including lawsuits, government investigations or audits, and the cost of completing environmental remediation efforts);

·	the competitive environment for the Corporation’s products and services;

·	the ability to attract and retain key personnel; and

·	economic, business and political conditions domestically and internationally.

These are only some of the factors that may affect the forward-looking statements contained in this press release. For further information regarding risks and uncertainties associated with Lockheed Martin’s business, please refer to the Corporation’s SEC filings, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” and “Legal Proceedings” sections of the Corporation’s 2009 annual report on Form 10-K, which may be obtained at the Corporation’s website: http://www.lockheedmartin.com.

It is the Corporation’s policy to only update or reconfirm its financial projections by issuing a press release. The Corporation generally plans to provide a forward-looking outlook as part of its quarterly earnings release but reserves the right to provide an outlook at different intervals or to revise its practice in future periods. All information in this release is as of July 26, 2010. Lockheed Martin undertakes no duty to update any forward-looking statement to reflect subsequent events, actual results or changes in the Corporation’s expectations. We also disclaim any duty to comment upon or correct information that may be contained in reports published by investment analysts or others.

NON-GAAP PERFORMANCE MEASURES

The Corporation believes that reporting ROIC provides investors with greater visibility into how effectively Lockheed Martin uses the capital invested in its operations. The Corporation uses ROIC to evaluate multi-year investment decisions and as a long-term performance measure, and also uses ROIC as a factor in evaluating management performance for incentive compensation purposes. ROIC is not a measure of financial performance under generally accepted accounting principles, and may not be defined and calculated by other companies in the same manner. ROIC should not be considered in isolation or as an alternative to net earnings as an indicator of performance.

1	Represents after-tax interest expense utilizing the federal statutory rate of 35 percent. Interest expense is added back to net earnings as it represents the return to debt holders. Debt is included as a component of average invested capital.

2	Debt consists of long-term debt, including current maturities, and short-term borrowings (if any).

3	Equity includes non-cash adjustments, primarily to recognize the funded / unfunded status of our benefit plans.
4	Average Benefit Plan Adjustments reflect the cumulative value of entries identified in our Statement of Stockholders’ Equity discussed in Note 11.
5	Yearly averages are calculated using balances at the start of the year and at the end of each quarter.

LOCKHEED MARTIN CORPORATION

Condensed Consolidated Statements of Earnings

Unaudited

(In millions, except per share data and percentages)

	THREE MONTHS ENDED						SIX MONTHS ENDED
	June 27, 2010 (a)			June 28, 2009 (a)			June 27, 2010 (a)			June 28, 2009 (a)
Net sales	$	11,442		$	11,072		$	21,915		$	21,280
Cost of sales		10,382			10,060			19,927			19,263
Gross profit		1,060			1,012			1,988			2,017
Other income, net		75			66			119			113
Operating profit		1,135			1,078			2,107			2,130
Interest expense		86			74			173			148
Other non-operating income (expense), net		(19	)		46			9			43
Earnings from continuing operations before income taxes		1,030			1,050			1,943			2,025
Income tax expense		303			319			675			628
Earnings from continuing operations		727			731			1,268			1,397
Earnings from discontinued operations (b), (c)		98			3			104			3
Net earnings	$	825		$	734		$	1,372		$	1,400
Effective tax rate		29.4	%		30.4	%		34.7	%		31.0	%
Earnings per common share:
Basic
Continuing operations	$	1.98		$	1.89		$	3.42		$	3.58
Discontinued operations		0.27			0.01			0.28			0.01
Basic earnings per common share	$	2.25		$	1.90		$	3.70		$	3.59
Diluted
Continuing operations	$	1.96		$	1.87		$	3.38		$	3.54
Discontinued operations		0.26			0.01			0.28			0.01
Diluted earnings per common share	$	2.22		$	1.88		$	3.66		$	3.55
Average number of shares outstanding
Basic		367.6			386.9			370.6			390.2
Diluted		371.7			390.9			374.7			394.2
Common shares reported in stockholders' equity at quarter end:								360.0			381.7

(a)	It is our practice to close our books and records on the Sunday prior to the end of the calendar quarter. The interim financial statements and tables of financial information included herein are labeled based on that convention.
(b)	In June 2010, we announced plans to divest Pacific Architects and Engineers, Inc. (PAE). As a result, the consolidated financial statements have been reclassified to reflect PAE as a discontinued operation.
(c)	The 2010 2nd quarter and year-to-date amounts include a $96 million tax benefit due to the recognition of a deferred tax asset for PAE book and tax differences recorded when the decision was made to dispose of PAE.

LOCKHEED MARTIN CORPORATION

Net Sales, Operating Profit and Margins (a)

Unaudited

(In millions, except percentages)

	THREE MONTHS ENDED								SIX MONTHS ENDED
	June 27, 2010			June 28, 2009			% Change		June 27, 2010			June 28, 2009			% Change
Net sales
Aeronautics	$	3,146		$	3,086			2%	$	6,079		$	5,867			4%
Electronic Systems		3,528			3,395			4		6,804			6,564			4
Information Systems & Global Solutions		2,688			2,535			6		5,034			4,875			3
Space Systems		2,080			2,056			1		3,998			3,974			1
Total net sales	$	11,442		$	11,072			3%	$	21,915		$	21,280			3%

Operating profit
Aeronautics	$	372		$	399			(7)%	$	696		$	754			(8)%
Electronic Systems		432			425			2		836			825			1
Information Systems & Global Solutions		238			224			6		445			451			(1)
Space Systems		245			224			9		458			436			5
Segment operating profit		1,287			1,272			1		2,435			2,466			(1)
Unallocated corporate expense, net		(152	)		(194	)				(328	)		(336	)
Total operating profit	$	1,135		$	1,078			5%	$	2,107		$	2,130			(1)%

Margins
Aeronautics		11.8	%		12.9	%				11.4	%		12.9	%
Electronic Systems		12.2			12.5					12.3			12.6
Information Systems & Global Solutions		8.9			8.8					8.8			9.3
Space Systems		11.8			10.9					11.5			11.0
Total operating segments		11.2			11.5					11.1			11.6
Total consolidated		9.9	%		9.7	%				9.6	%		10.0	%

(a)

In June 2010, we announced the realignment of two IS&GS businesses, Readiness & Stability Operations (RSO) and Savi Technology, Inc., with our Simulation, Training and Support business to form the Global Training & Logistics line of business within Electronic Systems. All of the business segment information presented in the attachments has been reclassified to reflect this realignment and to exclude

the PAE business from the IS&GS business segment information for all prior periods presented. PAE is now presented in discontinued operations. In connection with the realignment and divestiture activities announced in June, IS&GS' name was changed to Information Systems & Global Solutions, replacing "Services" with "Solutions" to better reflect its focus and scope.

	THREE MONTHS ENDED						SIX MONTHS ENDED
	June 27, 2010			June 28, 2009			June 27, 2010			June 28, 2009
Electronic Systems

Net Sales
Results under old structure	$	3,088		$	3,076		$	6,002		$	5,989
Realignment		440			319			802			575
Reported under new structure	$	3,528		$	3,395		$	6,804		$	6,564

Operating profit
Results under old structure	$	405		$	406		$	793		$	796
Realignment		27			19			43			29
Reported under new structure	$	432		$	425		$	836		$	825

Margins
Results under old structure		13.1	%		13.2	%		13.2	%		13.3	%
Realignment		(0.9	)		(0.7	)		(0.9	)		(0.7	)
Reported under new structure		12.2	%		12.5	%		12.3	%		12.6	%

	THREE MONTHS ENDED						SIX MONTHS ENDED
	June 27, 2010			June 28, 2009			June 27, 2010			June 28, 2009
Information Systems & Global Solutions

Net Sales
Results under old structure	$	3,277		$	3,018		$	6,149		$	5,779
Realignment		(440	)		(319	)		(802	)		(575	)
PAE to discontinued operations		(149	)		(164	)		(313	)		(329	)
Reported under new structure	$	2,688		$	2,535		$	5,034		$	4,875

Operating profit
Results under old structure	$	269		$	248		$	502		$	490
Realignment		(27	)		(19	)		(43	)		(29	)
PAE to discontinued operations (b)		(4	)		(5	)		(14	)		(10	)
Reported under new structure	$	238		$	224		$	445		$	451

Margins
Results under old structure		8.2	%		8.2	%		8.2	%		8.5	%
Realignment and exclusions		0.6			0.6			0.7			0.8
Reported under new structure		8.9	%		8.8	%		8.8	%		9.3	%

(a)

In June 2010, we announced the realignment of two IS&GS businesses, Readiness & Stability Operations (RSO) and Savi Technology, Inc., with our Simulation, Training and Support business to form the Global Training & Logistics line of business within Electronic Systems. We also announced plans to divest our PAE business. PAE is now presented in discontinued operations. This attachment shows what the results would have been under the old structure before the realignment, the impact of the realignment and the results under the new structure.

(b)

Earnings from discontinued operations on the Income Statement includes the operating profit amounts noted above plus interest income, interest expense and income tax expense or benefits. These amounts totaled $94 million and $90 million in the second quarter and first six months of 2010 as compared to ($2) million and ($7) million in the comparable 2009 periods.

LOCKHEED MARTIN CORPORATION

Selected Financial Data

Unaudited

(In millions, except per share data)

	THREE MONTHS ENDED						SIX MONTHS ENDED
	June 27, 2010			June 28, 2009			June 27, 2010			June 28, 2009
Unallocated corporate expense, net
FAS/CAS pension adjustment	$	(110	)	$	(115	)	$	(220	)	$	(229	)
Stock compensation expense		(41	)		(42	)		(82	)		(72	)
Other, net		(1	)		(37	)		(26	)		(35	)
Unallocated corporate expense, net	$	(152	)	$	(194	)	$	(328	)	$	(336	)

	THREE MONTHS ENDED						SIX MONTHS ENDED
	June 27, 2010			June 28, 2009			June 27, 2010			June 28, 2009
FAS/CAS pension adjustment
FAS pension expense	$	(357	)	$	(259	)	$	(714	)	$	(518	)
Less: CAS costs		(247	)		(144	)		(494	)		(289	)
FAS/CAS pension adjustment	$	(110	)	$	(115	)	$	(220	)	$	(229	)

	THREE MONTHS ENDED JUNE 27, 2010 (a)						SIX MONTHS ENDED JUNE 27, 2010 (a)
	Operating profit		Net earnings		Earnings per share		Operating profit		Net earnings			Earnings per share
Unusual Item - 2010
Elimination of Medicare Part D deferred tax assets	$	—	$	—	$	—	$	—	$	(96	)	$	(0.25	)

(a)	There were no unusual items reported in the first six months of 2009.

LOCKHEED MARTIN CORPORATION

Selected Financial Data

Unaudited

(In millions)

	THREE MONTHS ENDED				SIX MONTHS ENDED
	June 27, 2010		June 28, 2009		June 27, 2010		June 28, 2009
Depreciation and amortization of plant and equipment
Aeronautics	$	48	$	47	$	95	$	94
Electronic Systems		58		60		112		118
Information Systems & Global Solutions		14		17		28		31
Space Systems		44		42		87		85
Segments		164		166		322		328
Unallocated corporate expense, net		15		15		29		28
Total depreciation and amortization of plant and equipment	$	179	$	181	$	351	$	356

	THREE MONTHS ENDED				SIX MONTHS ENDED
	June 27, 2010		June 28, 2009		June 27, 2010		June 28, 2009
Amortization of purchased intangibles
Aeronautics	$	13	$	13	$	25	$	25
Electronic Systems		5		5		11		9
Information Systems & Global Solutions		4		8		12		17
Space Systems		—		1		1		3
Total amortization of purchased intangibles	$	22	$	27	$	49	$	54

LOCKHEED MARTIN CORPORATION

Condensed Consolidated Balance Sheets

(In millions, except percentages)

	(Unaudited)
	JUNE 27,			DECEMBER 31,
	2010			2009
Assets
Cash and Cash Equivalents	$	2,722		$	2,391
Short-Term Investments		877			346
Accounts Receivable, Net		6,383			5,840
Inventories		2,360			2,131
Deferred Income Taxes		962			812
Assets of Discontinued Operations Held for Sale		499			537
Other Current Assets		409			656
Total Current Assets		14,212			12,713

Property, Plant and Equipment, Net		4,381			4,517
Goodwill		9,797			9,810
Purchased Intangibles, Net		179			226
Prepaid Pension Asset		167			160
Deferred Income Taxes		3,614			3,779
Other Assets		3,889			3,906
Total Assets	$	36,239		$	35,111

Liabilities and Stockholders' Equity
Accounts Payable	$	2,271		$	2,014
Customer Advances and Amounts in Excess of Costs Incurred		5,180			5,039
Liabilities of Discontinued Operations Held for Sale		281			280
Other Current Liabilities		4,127			3,392
Total Current Liabilities		11,859			10,725

Long-term Debt, Net		5,019			5,052
Accrued Pension Liabilities		11,194			10,823
Other Postretirement Benefit Liabilities and Other Noncurrent Liabilities		4,433			4,382
Stockholders' Equity		3,734			4,129
Total Liabilities and Stockholders' Equity	$	36,239		$	35,111
Total debt-to-capitalization ratio:		57	%		55	%

LOCKHEED MARTIN CORPORATION

Condensed Consolidated Statements of Cash Flows

Unaudited

(In millions)

	SIX MONTHS ENDED
	June 27, 2010			June 28, 2009
Operating Activities
Net earnings	$	1,372		$	1,400
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization of plant and equipment		351			356
Amortization of purchased intangibles		49			54
Stock-based compensation		82			72
Excess tax benefits on stock compensation		(8	)		(13	)
Changes in operating assets and liabilities:
Accounts receivable, net		(552	)		(812	)
Inventories		(197	)		101
Accounts payable		247			118
Customer advances and amounts in excess of costs incurred		137			219
Other		1,393			859
Net cash provided by operating activities		2,874			2,354

Investing Activities
Expenditures for property, plant and equipment		(223	)		(299	)
Net cash used for short-term investment transactions		(531	)		—
Acquisition of businesses / investments in affiliates		(22	)		(187	)
Other		(28	)		(14	)
Net cash used for investing activities		(804	)		(500	)

Financing Activities
Repurchases of common stock		(1,247	)		(969	)
Issuances of common stock and related amounts		37			23
Excess tax benefits on stock compensation		8			13
Common stock dividends		(471	)		(449	)
Cash premium and transaction costs for debt exchange		(47	)		—
Net cash used for financing activities		(1,720	)		(1,382	)

Effect of exchange rate changes on cash and cash equivalents		(19	)		32
Net increase in cash and cash equivalents		331			504
Cash and cash equivalents at beginning of period		2,391			2,168
Cash and cash equivalents at end of period	$	2,722		$	2,672

LOCKHEED MARTIN CORPORATION

Condensed Consolidated Statement of Stockholders' Equity

Unaudited

(In millions, except per share data)

										Accumulated
				Additional						Other			Total
	Common			Paid-In			Retained			Comprehensive			Stockholders'
	Stock			Capital			Earnings			Loss			Equity
Balance at December 31, 2009	$	373		$	—		$	12,351		$	(8,595	)	$	4,129
Net earnings		—			—			1,372			—			1,372
Common stock dividends declared (a)		—			—			(704	)		—			(704	)
Stock-based awards and other		3			251			—			—			254
Common stock repurchases (b)		(16	)		(251	)		(1,031	)		—			(1,298	)
Other comprehensive loss		—			—			—			(19	)		(19	)
Balance at June 27, 2010	$	360		$	—		$	11,988		$	(8,614	)	$	3,734

	THREE MONTHS ENDED			THREE MONTHS ENDED												YEAR ENDED DECEMBER 31,
	March 28,			March 29,			June 28,			September 27,			December 31,
	2010			2009			2009			2009			2009			2008			2007

Net sales	$	10,473		$	10,208		$	11,072		$	10,893		$	12,332		$	41,926		$	41,232
Cost of sales		9,545			9,203			10,060			9,894			11,103			37,291			37,018
Gross profit		928			1,005			1,012			999			1,229			4,635			4,214
Other income, net		44			47			66			82			28			475			295
Operating profit		972			1,052			1,078			1,081			1,257			5,110			4,509
Interest expense		87			74			74			74			86			332			341
Other non-operating income (expense), net		28			(3	)		46			54			26			(91	)		189
Earnings from continuing operations before income taxes		913			975			1,050			1,061			1,197			4,687			4,357
Income tax expense		372			309			319			267			353			1,479			1,318
Earnings from continuing operations		541			666			731			794			844			3,208			3,039
Earnings (loss) from discontinued operations (a)		6			—			3			3			(17	)		9			(6	)
Net earnings	$	547		$	666		$	734		$	797		$	827		$	3,217		$	3,033
Effective tax rate		40.7	%		31.7	%		30.4	%		25.2	%		29.5	%		31.6	%		30.3	%
Earnings per common share:
Basic
Continuing operations	$	1.45		$	1.69		$	1.89		$	2.08		$	2.23		$	8.03		$	7.31
Discontinued operations		0.01			—			0.01			0.01			(0.04	)		0.02			(0.02	)
Basic earnings per common share	$	1.46		$	1.69		$	1.90		$	2.09		$	2.19		$	8.05		$	7.29
Diluted
Continuing operations	$	1.43		$	1.68		$	1.87		$	2.06		$	2.21		$	7.84		$	7.12
Discontinued operations		0.02			—			0.01			0.01			(0.04	)		0.02			(0.02	)
Diluted earnings per common share	$	1.45		$	1.68		$	1.88		$	2.07		$	2.17		$	7.86		$	7.10

LOCKHEED MARTIN CORPORATION

Net Sales, Operating Profit and Margins - Realigned Business Segments

Unaudited

(In millions, except percentages)

	THREE MONTHS ENDED			THREE MONTHS ENDED												YEAR ENDED DECEMBER 31,
	March 28,			March 29,			June 28,			September 27,			December 31,
	2010			2009			2009			2009			2009			2008			2007
Net sales:
Aeronautics	$	2,933		$	2,781		$	3,086		$	3,084		$	3,250		$	11,473		$	12,303
Electronic Systems		3,276			3,169			3,395			3,254			3,714			12,803			12,046
Information Systems & Global Solutions		2,346			2,340			2,535			2,482			2,761			9,623			8,680
Space Systems		1,918			1,918			2,056			2,073			2,607			8,027			8,203
Total net sales	$	10,473		$	10,208		$	11,072		$	10,893		$	12,332		$	41,926		$	41,232

Operating profit:
Aeronautics	$	324		$	355		$	399		$	397		$	426		$	1,433		$	1,476
Electronic Systems		404			400			425			404			431			1,583			1,441
Information Systems & Global Solutions		207			227			224			225			272			980			900
Space Systems		213			212			224			236			300			953			856
Segment operating profit		1,148			1,194			1,272			1,262			1,429			4,949			4,673
Unallocated corporate expense, net		(176	)		(142	)		(194	)		(181	)		(172	)		161			(164	)
Total operating profit	$	972		$	1,052		$	1,078		$	1,081		$	1,257		$	5,110		$	4,509

Margins:
Aeronautics		11.0	%		12.8	%		12.9	%		12.9	%		13.1	%		12.5	%		12.0	%
Electronic Systems		12.3			12.6			12.5			12.4			11.6			12.4			12.0
Information Systems & Global Solutions		8.8			9.7			8.8			9.1			9.9			10.2			10.4
Space Systems		11.1			11.1			10.9			11.4			11.5			11.9			10.4
Total operating segments		11.0			11.7			11.5			11.6			11.6			11.8			11.3
Total consolidated		9.3	%		10.3	%		9.7	%		9.9	%		10.2	%		12.2	%		10.9	%

LOCKHEED MARTIN CORPORATION
Selected Financial Data - Realigned Business Segments
Unaudited
(In millions)
	THREE MONTHS ENDED		THREE MONTHS ENDED									YEAR ENDED DECEMBER 31,
	March 28,		March 29,		June 28,		September 27,		December 31,
	2010		2009		2009		2009		2009			2008		2007
Depreciation and amortization of plant and equipment
Aeronautics	$	47	$	47	$	47	$	49	$	55		$	190	$	181
Electronic Systems		54		58		60		61		66			257		230
Information Systems & Global Solutions		14		14		17		17		18			61		65
Space Systems		43		43		42		46		51			166		136
Segments		158		162		166		173		190			674		612
Unallocated corporate expense, net		14		13		15		15		16			53		54
Total depreciation and amortization of plant and equipment	$	172	$	175	$	181	$	188	$	206		$	727	$	666

Amortization of purchased intangibles
Aeronautics	$	12	$	12	$	13	$	13	$	12		$	50	$	50
Electronic Systems		6		4		5		4		5			18		34
Information Systems & Global Solutions		8		9		8		8		9			36		48
Space Systems		1		2		1		2		(3	)		5		9
Segments		27		27		27		27		23			109		141
Unallocated corporate expense, net		—		—		—		—		—			9		12
Total amortization of purchased intangibles	$	27	$	27	$	27	$	27	$	23		$	118	$	153

NEWS MEDIA CONTACT:	Jeff Adams, 301/897-6308
INVESTOR RELATIONS CONTACT:	Jerry Kircher, 301/897-6584

(In millions, except percentages)	2010 Projections
	April 2010	Current Update
NET EARNINGS INTEREST EXPENSE (MULTIPLIED BY 65%) 1	Combined	Combined
RETURN	≥ $2,860	≥ $3,000

AVERAGE DEBT 2,5 AVERAGE EQUITY 3,5 AVERAGE BENEFIT PLAN ADJUSTMENTS 4,5	Combined	Combined
AVERAGE INVESTED CAPITAL	≤ $17,900	≤ $17,650

RETURN ON INVESTED CAPITAL	≥ 16.0%	≥ 17.0%

	June 27,		December 31,
	2010		2009
Backlog
(In millions)
Aeronautics	$	24,400	$	26,700
Electronic Systems		21,900		23,100
Information Systems & Global Solutions		9,900		10,900
Space Systems		16,600		16,800
Total	$	72,800	$	77,500

LOCKHEED MARTIN CORPORATION
Backlog - Realigned Business Segments
Unaudited
(In millions)
	March 28,		March 29,		June 28,		September 27,		December 31,		December 31,
	2010		2009		2009		2009		2009		2008
Backlog:
Aeronautics	$	26,000	$	27,100	$	27,900	$	25,900	$	26,700	$	27,200
Electronic Systems		22,300		24,000		22,100		21,700		23,100		23,500
Information Systems & Global Solutions		10,600		11,400		10,400		10,200		10,900		11,800
Space Systems		15,700		17,800		18,400		18,000		16,800		17,900
Total backlog	$	74,600	$	80,300	$	78,800	$	75,800	$	77,500	$	80,400

(a)	Includes dividends ($0.63 per share) declared and paid in the first and second quarters. This amount also includes a dividend ($0.63 per share) that was declared on June 24, 2010 and is payable on September 24, 2010 to stockholders of record on September 1, 2010.
(b)	We repurchased 9.7 million shares for $781.8 million during the second quarter. Year-to-date, we repurchased 16.2 million common shares for $1.3 billion. We have 12.6 million shares remaining under our share repurchase program as of June 27, 2010.

	THREE MONTHS ENDED				SIX MONTHS ENDED
Aircraft Deliveries	June 27, 2010		June 28, 2009		June 27, 2010		June 28, 2009

F-16		5		8		11		16
F-22		4		5		8		10
C-130J		6		3		9		6