Financial Reporting: Lockheed Martin – Q3 of 2011

Highlights:

-  Net sales grew 7 percent to $12.1 billion 

-  Earnings from continuing operations grew 19 percent to $665 million

-      Earnings per diluted share from continuing operations grew 30 percent to $1.99

-      Increased quarterly dividend 33 percent to $1.00 per share

-      Repurchased 13.4 million shares at a cost of $964 million

-      Increases 2011 outlook and provides trend information for 2012

BETHESDA, Md., October 26th, 2011 – Lockheed Martin Corporation (NYSE: LMT) reported third quarter 2011 net sales of $12.1 billion, compared to $11.3 billion in 2010. Earnings from continuing operations during the third quarter of 2011 were $665 million, or $1.99 per diluted share, compared to $557 million, or $1.53 per diluted share, in 2010.  Cash from operations during the third quarter of 2011 was $511 million, compared to $513 million during 2010.

Third quarter 2011 results included a special charge of $39 million, which reduced earnings by $25 million, or $0.07 per diluted share, related to planned workforce reductions at Information Systems & Global Solutions (IS&GS) and Corporate Headquarters. The third quarter of 2010 included a special charge of $178 million related to the Voluntary Executive Separation Program (VESP), which decreased earnings by $116 million, or $0.32 per diluted share. Consistent with prior periods, third quarter 2011 results also included a FAS/CAS pension expense adjustment of $231 million, which reduced earnings by $143 million, or $0.43 per diluted share, compared to a FAS/CAS pension expense adjustment of $111 million, which reduced earnings by $69 million, or $0.19 per diluted share, in 2010.

“Our focus on program execution in support of our customers resulted in a strong third quarter,” said Bob Stevens, chairman and chief executive officer.  “We continue to take aggressive actions, including painful workforce reductions, to reduce costs and deliver value to our customers and shareholders in this challenging global security and economic reality that we expect will extend into 2012.”

Status of F-35 LRIP 5              Lockheed Martin received customer authorization and initial funding in July 2010 to begin work on low-rate initial production (LRIP) 5.  In January 2011, Lockheed Martin notified their customer that additional funding would be required to continue the advanced procurement.  Despite not yet receiving such funding, Lockheed Martin continued work in an effort to meet their customer’s desired aircraft delivery dates for the LRIP 5 aircraft.  As a result, as of Sept. 25, 2011, they have approximately $750 million in potential termination liability exposure.  Without additional funding or contract coverage, Lockheed Martin estimates that their exposure by the end of 2011 will be approximately $1.2 billion.  Lockheed Martin is in the process of negotiating with their customer to obtain additional funding and finalize contract negotiations.

Lockheed Martin Begins GeoEye-2 Satellite Integration

On October 25^th (2011) -- Lockheed Martin [NYSE: LMT] announced that it will begin integration of GeoEye’s (NASDAQ: GEOY) next-generation, high-resolution Earth-imaging satellite, known as GeoEye-2, with the planned delivery of its integrated propulsion system to Lockheed Martin’s Sunnyvale, Calif. facilities later this month.

The start of vehicle integration marks the on-schedule progress of installation and testing of satellite components and subsystems over the next several months in preparation for the delivery of ITT’s high-resolution imaging payload early next year.

The integrated satellite structure and propulsion system serves as the structural backbone of the satellite and is essential in maneuvering GeoEye-2 to its final sun-synchronous orbit location, as well as conducting on-orbit repositioning maneuvers throughout its mission life. The fully integrated propulsion system was assembled and tested at Lockheed Martin’s Space & Technology Center in Stennis, Miss.

“The completion of the propulsion system installation and the start of vehicle integration is a critical step forward in maintaining GeoEye-2’s schedule of on-orbit operations in 2013,” said Allen Anderson, GeoEye-2 program director for Lockheed Martin Space Systems Company. “We look forward to working closely with GeoEye to achieve mission success and deliver the world’s highest resolution commercial imaging satellite to its customers.”

Bill Schuster, GeoEye’s chief operating officer, commented, “We are very pleased that Lockheed Martin has remained ahead of schedule and completed this next milestone in the development and construction of our GeoEye-2 satellite. It’s remarkable that we formalized our agreement with Lockheed Martin almost exactly one year ago, and now they are delivering the equipment section for start of vehicle integration.”

Lockheed Martin Space Systems Company is developing GeoEye-2 under a fixed-price contract with GeoEye. Once operational in 2013, GeoEye-2 will feature significant improvements to its predecessors, including enhanced tasking and the ability to collect more imagery at a faster rate with a new ITT camera. Lockheed Martin Commercial Launch Services will launch GeoEye-2 aboard an Atlas V rocket.

Space Systems Company designs, develops, tests, manufactures and operates a full spectrum of advanced-technology systems for national security, civil and commercial customers. Chief products include human space flight systems; a full range of remote sensing, navigation, meteorological and communications satellites and instruments; space observatories and interplanetary spacecraft; laser radar; ballistic missiles; missile defense systems; and nanotechnology research and development.

Headquartered in Bethesda, Md., Lockheed Martin is a global security company that employs about 126,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The Corporation's 2010 sales from continuing operations were $45.8 billion.