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LMT Credit Suisse_11-20-08 1 Lockheed Martin Corporation Credit Suisse Aerospace and Defense Conference 20 November 2008 Bruce L. Tanner Executive Vice President & CFO Ralph Heath Executive Vice President - Aeronautics
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Page 1: Lockheed Martin Corporation - IIS Windows Serverlibrary.corporate-ir.net/library/83/839/83941/items/324477/EE4E7E... · LMT Credit Suisse_11-20-08 1 Lockheed Martin Corporation Credit

LMT Credit Suisse_11-20-08 1

Lockheed Martin CorporationCredit Suisse Aerospace and Defense Conference

20 November 2008

Bruce L. Tanner Executive Vice President & CFO

Ralph HeathExecutive Vice President - Aeronautics

Page 2: Lockheed Martin Corporation - IIS Windows Serverlibrary.corporate-ir.net/library/83/839/83941/items/324477/EE4E7E... · LMT Credit Suisse_11-20-08 1 Lockheed Martin Corporation Credit

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Our presentation contains “forward-looking” statements or projections based on current expectations. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially due to: the availability of government funding; changes in customer priorities; the impact of continued hostilities in Iraq; budgetary constraints; program and contract performance; the timing and availability of future government awards; the outcome of legal proceedings; economic, business and regulatory conditions and other factors. We disclaim any duty to update forward-looking statements to reflect new developments.

Our SEC filings (found at www.lockheedmartin.com or at www.sec.gov), including our 2007 Form 10-K and 2008 Form 10-Qs, contain more information on the types of risks and other factors that could adversely affect these statements.

Forward Looking Statements

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• Corporate Overview – Bruce Tanner

• Aeronautics Overview – Ralph Heath

• Discussion

Agenda

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Global Security Company with Balanced Portfolio

Electronic Systems$11.2B

Aeronautics$12.3B

Space Systems

$8.2B

2007 Sales = $41.9 B

Operating Segment Margins*

(%)

Lockheed Martin

IS&GS$10.2B

Defense:Air Force

Navy/USMCArmy

Int’l59% 26%

15%

Civil, HLS,Intelligence,

& Other

*See appendix for definition and calculation

Return on Invested Capital*

(%)

11.8%

3Q YTD

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AeronauticsKey Programs• Combat Aircraft

– F-16– F-22– F-35

• Air Mobility Aircraft– C-130J– C-5

• Aircraft Logistics/Sustainment• Advanced Development Programs

– Skunkworks

Combat Aircraft

77%Air Mobility

13%

2007 Sales = $12.3 B

U.S. Government

78%

International22%

Other 10%

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Electronic Systems

Missiles & Fire Control

37%

Platform Training &

Energy 22%

2007 Sales = $11.2 B

Maritime Systems &

Sensors41%

U.S. Government

74%International

26%

Key Programs• Missile Defense

– Aegis, PAC-3, THAAD, MEADS• Maritime Systems & Sensors

– Littoral Combat Ship• Radar & Surface Systems• Fire Control Systems

– SNIPER, TADS, Arrowhead• Missile Systems

– Hellfire, ATACMS, GMLRS, JAVELIN, JASSM

• Ground Vehicles– Joint Light Tactical Vehicle

• Rotary Wing– VH-71, MH-60

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Information Systems & Global Services

Information Systems

30%

Global Services

24%

2007 Sales = $10.2 B

Mission Solutions

46%

U.S. Government

94%

International6%

Key Programs• Mission Solutions

– Air Traffic Management– Census Activities– C4ISR– National Archives– AMF JTRS– WIN-T

• Information Systems– FBI Sentinel, NGI– HR Systems (IHOPP)– GSA Alliant– DOE Hanford

• Global Services– Peacekeeping/Nation Building (PAE)– RFID Devices (Savi)– Army Logistics Support– NASA Support (FDOC)

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Space Systems

Strategic & Defensive

Missile Systems

12%

2007 Sales = $8.2 B

Satellites68%

U.S. Government

94%

International6%

20%

Space Transportation

Key Programs• Satellites

– Government-GPS III, AEHF, SBIRS– Commercial

• Strategic & Defense Missiles– FBM Trident D5– Targets & Countermeasures

• Space Transportation– Orion CEV– External Tank– Space Exploration Systems

• Shuttle Operations (USA)• United Launch Alliance (ULA)

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Cash Flow Generation

Generated ~$16 Billion Of Cash From Operations Since 2003

Cash From Operations

($B)

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M&A History

Business Area

2003 2004 2005 2006 2007 2008

Electronic Systems

Leigh Aerosystems

Sippican

Soflinx

Insys HMT Vehicles

ISX

Perceptek

3DSolve

Aculight

Tenix/RLM

IS&GS Orincon

ACS

STASYS

SYTEX

Aspen

Savi Tech.

PAE

MSD

RLM

EagleInternat’l

Space Systems

Coherent Nantero

22 Acquisitions Closed Since 2003 for >$3 Billion

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Share Repurchase Focus Continues… ~40 Million of Authority RemainsDouble Digit Increases to Annual Dividends…+36% Announced Oct. 2008

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2003 2004 2005 2006 2007Dividends

($B)

Shareholder Focus: Stock Repurchases & Dividends

Share Repurchases

$0.5

$0.8

$1.2

$2.1 $2.1

$0.3

$0.4

$0.5

$0.5$0.6

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($B)

Shareholder Focus: Goal: Return 50% of Annual Free Cash to Shareholders

Share Repurchases

$0.5

$0.8

$1.2

$2.1 $2.1

$0.3

$0.4

$0.5

$0.5$0.6

Returned $9 Billion to Shareholders over Last Five Years

66%

55%

72%

91% 83%

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Credit Suisse Aerospace & Defense Conference

LMT Credit Suisse_11-20-08 13

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Development Rate Production Post Production

TimeNext-Gen Airlift

UAV

F-35F-22

F-16C-130

U-2

P-3

C-5

Future Bomber

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Stalker

Aeronautics Portfolio

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The Future Is Flying

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• Tracking to Development Milestones

• Building Production Aircraft

• Standing Up Global Delivery System

• Maintaining Strong Partnerships

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World-Class Performance

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Development

49 Aircraft38 Zero Defect

Production3 World-Class Lines

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DiscussionPowered by Innovation . . . Guided By Integrity

LMT Credit Suisse_11-20-08 17

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Non-GAAP Financial Measures DisclosureThis presentation contains non-Generally Accepted Accounting Principles (GAAP) financial measures (as defined by SEC Regulation G). While we believe that these non-GAAP financial measures may be useful in evaluating Lockheed Martin, this information should be considered supplemental and is not a substitute for financial information prepared in accordance with GAAP. In addition, our definitions for non-GAAP measures may differ from similarly titled measures used by other companies or analysts.

Segment Operating Profit / MarginSegment Operating Profit represents the total earnings from our business segments before unallocated corporate (expense) and income, interest expense, other non-operating income and expense, and income tax expense. This measure is used by our senior management in evaluating the performance of our business segments. The caption “Unallocated Corp. Expense”, or “Unallocated Corp. (Exp.) / Inc.” reconciles Segment Operating Profit to consolidated Operating Profit. The caption “Other Pre-Tax Expense (net)” reconciles Segment Operating Profit to consolidated Earnings Before Income Taxes. Segment Margin is calculated by dividing Segment Operating Profit by Sales.

ROICManagement believes that Return on Invested Capital (ROIC) provides greater visibility into how effectively Lockheed Martin deploys capital. Management uses ROIC as a target level to help ensure that overall performance is understood and acceptable when capital is invested. ROIC is not a measure of financial performance under GAAP, 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 company performance.Management uses these measures to compare segment performance and for comparisons to other companies within our industry as an alternative to GAAP. These measures also may be helpful to investors in understanding period-over-period financial results separate and apart from items that may, or could, have a disproportionate positive or negative impact on our financial results in any particular period.

Free Cash FlowFree Cash Flow is calculated by subtracting Capital Expenditures from Cash From Operations

Definitions of Non-GAAP Measures

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Reconciliation to GAAP($M)

ActualActual Actual Actual Actual Actual Actual YTD 3Q2002 2003 2004 2005 2006 2007 2008

Sales $26,578 $31,824 $35,526 $37,213 $39,620 $41,862 $31,599

Segment Op. Profit 2,020 2,468 2,976 3,421 4,031 4,691 3,715

Unallocated Corp. Expense (862) (449) (887) (568) (261) (164) 68

Consolidated EBIT $1,158 $2,019 $2,089 $2,853 $3,770 $4,527 $3,783

Segment Margin 7.6% 7.8% 8.4% 9.2% 10.2% 11.2% 11.8%

Consolidated Margin 4.4% 6.3% 5.9% 7.7% 9.5% 10.8% 12.0%

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Actual Actual Actual Actual Actual Actual2002 2003 2004 2005 2006 2007

Net Earnings $500 $1,053 $1,266 $1,825 $2,529 $3,033Interest Exp x .65 378 317 276 241 235 229

Return $878 $1,370 $1,542 $2,066 $2,764 $3,262

Debt (Average) $7,491 $6,612 $5,932 $5,077 $4,727 $4,416Equity (Average) 6,853 6,170 7,015 7,590 7,686 7,661Benefit Plan Adjustment (Avg.) 341 1,504 1,296 1,545 2,006 3,171

Invested Capital $14,685 $14,286 $14,243 $14,212 $14,419 $15,248

ROIC 6.0% 9.6% 10.8% 14.5% 19.2% 21.4%

Our definition of Return on Invested Capital (ROIC) is net earnings plus after-tax interest expense divided by average invested capital (stockholders' equity plus debt), after adjusting stockholders’ equity by adding back adjustments related to postretirement benefit plans. Average benefit plan adjustments reflect the cumulative value of entries identified in our Statement of Stockholders Equity related to recognized and unrecognized benefit plan-related amounts, the adjustment for adoption of FAS 158 and the minimum pension liability.

ROIC Calculation($M, Except %)