#1NEWS TIETEE Lockheed Martin 2nd Quarter 2010 Financial Results Conference Call July 27, 2010 11:00 a.m. EDT "A LOCKHEED MARTIN Webcast login at www.lockheedmartin.com/investor Webcast replay & podcast available by 2:00 p.m. EDT July 27, 2010 at www.lockheedmartin.com/investor Audio replay available from 1:00 p.m. EDT July 27, 2010 through midnight July 30, 2010. Access audio replay at: 800-642-1687 U.S. & Canada 706-645-9291 International Confirmation code: 80276979 July 27, 2010#2Forward Looking Statements 4 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 and budgetary constraints; changes in customer priorities; the impact of economic recovery and stimulus plans and continued hostilities in Iraq and Afghanistan on funding for defense programs; program and contract performance; return or loss on benefit plan assets, interest and discount rates, and other changes that may affect benefit plan assumptions; the effect of capitalization changes (such as share repurchase activity, advance pension funding, option exercises, or debt levels) on earnings per share; failure to have key programs recertified after notice of exceeding cost-growth thresholds specified by the Nunn- McCurdy process; the timing and availability of future government awards; the outcome of legal proceedings; the future impact of acquisitions, divestitures or joint ventures, 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 timing and availability of future government awards;; 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 2009 Form 10-K and 2010 10-Q, contain more information on the types of risks and other factors that could adversely affect these statements. 2010 Financial Results are Unaudited Chart 2 July 27, 2010#32010 Reorganization 4 Pacific Architects & Engineers, Inc. (PAE) moved from IS&GS to discontinued operations ● ● EIG remains in IS&GS continuing operations as we evaluate a sale transaction versus a spin-off to stockholders All financial information reflects assumptions above as well as realignment between IS&GS and Electronics: Readiness & Stability Operations (RSO) and Savi Technology moved from IS&GS to Electronics Chart 3 RSO and Savi combined with Simulation, Training & Support (STS) to form Global Training & Logistics (GTL) See chart 11 for more details July 27, 2010#42Q Sales Summary ($B) $4.0 $3.0 $2.0 $1.0 $0.0 $4.0 $3.0 $2.0 $1.0 $0.0 Chart 4 Aeronautics 2Q 2009 2Q 2009 IS&GS + 2% 2Q 2010 + 6% $4.0 $3.0 $2.0 $1.0 $0.0 $4.0 $3.0 $2.0 $1.0 $0.0 Electronic Systems 2Q 2009 Space 2Q 2010 2Q 2009 Total Sales Growth of +3% As Expected... On Track To Meet Full Year Guidance + 4% # 2Q 2010 + 1% 2Q 2010 July 27, 2010#52Q YTD Cash From Operations ($B) Cash from Operations ($B) Chart 5 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 $2.4B $0.3B $2.1B Free Cash YTD 2Q 2009 Free Cash Flow *See Charts 16-17 for Definitions of Non-GAAP Measures $2.9B $0.2B $2.7B Free Cash YTD 2Q 2010 Capital Expenditures Strong Cash Generation YTD 2010.... $2.9 Billion After Funding $350M to Pension # July 27, 2010#6Share Repurchase Activity 12.0 10.0 (M) 8.0 6.0 4.0 2.0 0.0 Chart 6 Share Repurchases 9.7 M Shares 6.5M Shares $516M $782M 1Q 2010 500 400 300 (M) 200 100 0 Share Count 368.5M 360.0M 2Q 2010 1Q 2010 2Q 2010 Share Repurchases (M) Balance Sheet Shares (M) Strong Share Repurchase Activity ... Continued Reduction in Outstanding Share Count 4 July 27, 2010#7LMT Bond Maturities 1,600 1,400 1,200 1,000 ($M) 800 600 400 200 0 Exchanged Chart 7 $900 $650 LA $452 $203 $6 $168 LMT Corporate Bond $150 $275 $205 Exchanged $1,176 New Issue New Issue ↓ '10'11'12'13'14'15'16'17'18'19'20'21'22'23'24'25'26'27'28'29'30'31'32'33'34'35'36'37'38'39 40 $600 $728 Exchanged high coupon, high premium debt for new 30 year bonds plus cash. • Extended the bond maturity and reduced the average coupon of our debt portfolio. ● Continue to Proactively Manage Bond Portfolio July 27, 2010#8$ EPS 2Q Earnings Per Share $3.00 $2.00 $1.00 $0.00 Chart 8 Continuing Ops EPS $1.87 $1.96 $ EPS See Charts 16-17 for Definitions of Non-GAAP Measures $3.00 $2.00 $1.00 $0.00 Adjusted EPS $2.07 $0.19 $1.87 $0.01 $2.41 $0.19 $0.26 $1.96 ☆ 2Q 2009 2Q 2010 2Q 2009 2Q 2010 EPS Continuing Ops EPS Discontinued Ops FAS/CAS Adjustment Continuing to Deliver Value to Stockholders July 27, 2010#92010 GAAP EPS Reconciliation Chart 9 April 2010 GAAP EPS Outlook Operational Improvements - Space Systems Reduced Share Count / Other PAE Earnings to Discontinued Operations July 2010 Continuing Operations EPS Outlook PAE Earnings From Continuing Operations Tax Benefit on PAE Book / Tax Basis Delta July 2010 GAAP EPS Outlook $7.00 -7.20 ~ .05 ~ .15 ~ (.05) $7.15-7.35 ~ .05 ~ .25 $7.45 - 7.65 4 .15 July 27, 2010#10Chart 10 Financial Appendix & Updated Outlook July 27, 2010#11● PAE Moved From IS & GS to Discontinued Operations $750M Reduction to Prior IS&GS Sales Projection $30M Reduction to Prior IS&GS Operating Profit Projection Enterprise Integration Group Remains in IS&GS Continuing Operations • Increased Space Systems' Operating Profit Outlook by $30M Reduced Full Year Projections for Share Count and Other Organizational Realignment Between IS&GS and Electronic Systems (ES) Readiness and Stability Operations and Savi Technology From IS&GS to ES $1,750M of Projected Sales and $95M of Operating Profit From IS&GS to ES ● ● ● 2010 Outlook Revisions ● ● ● ● 4 • Discontinued Operations Projected to Generate $0.30 of EPS $0.05 From $30M of Operating Profit Moved From IS&GS to Disc Ops $0.25 Tax Benefit Resulting From Delta in PAE Book Basis vs. Tax Basis • EPS Projection Excludes Potential Gain / (Loss) on PAE Sale ● Chart 11 July 27, 2010#122010 Outlook Update ($M, Except EPS) Sales Segment Operating Profit* Mid-Point Segment Margin* Other Pre-Tax Expense (net) Earnings Before Income Taxes EPS - Continuing Operations EPS Discontinued Operations GAAP EPS Cash From Operations ROIC *See Charts 16-17 for Definitions of Non-GAAP Measures Chart 12 Prior (April) $46,250 - 47,250 $5,025 - 5,125 10.9% ~ (1,050) $3,975 - 4,075 $7.00 - $7.20 $7.00 -7.20 ≥ $3,300 ≥ 16.0% 4 Current (July) $45,500 46,500 $5,025 - 5,125 11.0% ~ (1,050) $3,975 - 4,075 $7.15 - $7.35 - $0.30 $7.45 - 7.65 ≥ $3,400 ≥17.0% - July 27, 2010#132010 Outlook Update ($M, Except EPS) Segment Operating Profit Unallocated Corp Inc / (Exp) FAS/CAS Adjustment Unusual Items Stock Comp Expense Other Unallocated Items Operating Profit Interest Expense Non-Operating Inc / (Exp) Earnings Before Income Taxes EPS - Continuing Operations Chart 13 Prior (April) $5,025 - 5,125 ~ (440) ~ (170) ~ (120) $4,295 - 4,395 - (350) - 30 $3,975-4,075 $7.00 -7.20 4 Current (July) $5,025-5,125 ~ (440) ~ (170) ~ (100) $4,315-4,415 ~ (350) ~ 10 $3,975-4,075 $7.15 - 7.35 July 27, 2010#142010 Sales Outlook ($M) Sales (April) Aeronautics Space $13,100 13,350 $8,250 - 8,500 Electronics IS & GS $12,000 12,250 $12,900 - 13,150 Chart 14 Sales (July) Aeronautics $13,100 13,350 ■ Electronics $13,750 14,000 - 4 Space $8,250 - 8,500 IS & GS $10,400 10,650 $46,250 47,250M $45,500 46,500M Updated for IS & G S/ES Realignment & PAE to Disc Ops July 27, 2010 ■#152010 Segment Operating Profit Outlook ($M) Segment Op Profit (April) Segment Op Profit (July) Aeronautics $1,475 - 1,500 Space $905 - 930 Electronics IS & GS $1,560 1,585 $1,085 1,110 $5,025 - 5,125M See Charts 16-17 for Definitions of Non-GAAP Measures Chart 15 Aeronautics $1,475 - 1,500 Electronics $1,655 1,680 Space $935-960 IS & GS $960 - 985 $5,025 - 5,125 M Space Increased, IS&GS/ES Realigned & PAE to Disc Ops July 27, 2010#16☆ Non-GAAP Financial Measures Disclosure This presentation, and today's conference call remarks, contain 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. Definitions of Non-GAAP Measures Segment Operating Profit / Margin Segment Operating Profit represents the total earnings from our business segments before unallocated corporate income and expense, 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 Inc / (Exp)" 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. Mid-point Segment Margin represents the mid-point of the outlook range for Segment Operating Profit divided by the mid-point of the outlook range for Sales. 2010 Outlook (Apr) $46,250 47,250 $5,025 - 5,125 10.9% $4,295 -4,395 9.3% Sales Segment Operating Profit Mid-Point Segment Margin Consolidated Operating Profit Mid-Point Operating Margin (1) Decrease in Sales Outlook reflects transfer of PAE to Discontinued Operations 2010 Outlook (July) $45,500 46,500 (1) $5,025 - 5,125 11.0% $4,315-4,415 9.5% ROIC Management 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. Chart 16 Free Cash Flow Lockheed Martin defines free cash flow as GAAP cash from operations less the amount identified as expenditures for property, plant and equipment. July 27, 2010#174 Adjusted Earnings Per Share Lockheed Martin defines adjusted earnings per share as GAAP earnings per share excluding the effect of the FAS/CAS pension adjustment. Management uses these measures as an additional means to compare and forecast the company's operating performance before the effect of the FAS/CAS pension adjustment and in comparison to that of other companies within our industry as an alternative to GAAP. Definitions of Non-GAAP Measures Continued Chart 17 Reconciliation of Adjusted EPS GAAP EPS Continuing Operations Plus: Discontinued Operations EPS Excluding Unusual Adjustment Plus: FAS/CAS Adjustment Adjusted EPS 2Q 2009 $1.87 0.01 $1.88 0.19 $2.07 2Q 2010 $1.96 0.26 $2.22 0.19 $2.41 July 27, 2010#18ROIC Calculation ($M) Net Earnings Interest Exp x .65 Return Debt (Average) Equity (Average) Benefit Plan Adjustments (Average) Invested Capital (Average) ROIC Actual 2009 $3,024} 198 $3,222 Chart 18 $4,054 3,155 8,960 $16,169 19.9% Prior (Apr) Current (July) 2010 2010 Combined ≥ $2,860 Combined 4 ≤ $17,900 ≥ 16.0% Combined ≥ $3,000 Combined ≤ $17,650 ≥ 17.0% 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 incorporated into our Statement of Stockholders Equity to recognize the funded / unfunded status of our benefit plans. July 27, 2010