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Lockheed Martin Corporation

27 Jan 11. Lockheed Martin Corporation (NYSE: LMT) today reported fourth quarter 2010 net sales of $12.8bn, compared to $12.2bn in 2009. Earnings from continuing operations for the fourth quarter of 2010 were $829m, or $2.30 per diluted share, compared to $836m, or $2.19 per diluted share, in 2009. During the fourth quarter of 2010, the Corporation incurred an unusual charge of $42m ($27m after-tax, or $0.08 per share) related to a previously announced facilities consolidation within Mission Systems & Sensors (MS2), a line of business in Electronic Systems. The fourth quarter of 2010 also included a reduction of income tax expense related to the extension of the Research and Development (R&D) tax credit and additional benefits from U.S. manufacturing deductions. The fourth quarter of 2009 included an unusual tax benefit from the resolution of an IRS examination, which increased earnings from continuing operations by $11m, or $0.03 per share.Cash from operations in the fourth quarter of 2010 was $160m, after making $840m in discretionary contributions to the Corporation’s pension trust. Cash from operations in the fourth quarter of 2009 was ($605)m, after making $1.5bn in discretionary contributions to the Corporation’s pension trust.

“We had a solid fourth quarter, marked by robust bookings and excellent cash generation,” said Bob Stevens, Chairman and CEO. “For the year, sales and backlog grew. Combined with strong cash flow, I believe it was very solid performance in a very demanding year. Looking ahead, our employees are focused on providing increasingly affordable solutions to our customers and continuing strong financial results for our shareholders.”

Divestitures Update

On Nov. 23, 2010, the Corporation announced that it had completed the divestiture of its Enterprise Integration Group (EIG) business. Earnings from discontinued operations for the fourth quarter of 2010 include a $184m ($0.51 per share) gain from the sale of EIG. Operating results for EIG are included in discontinued operations for all periods presented. The Corporation received $815m in gross proceeds and paid $260m in tax payments related to the transaction in the quarter. As previously announced on June 2, 2010, the Corporation plans to divest most of Pacific Architects and Engineers, Inc. (PAE), a business within Information Systems & Global Solutions (IS&GS). As a result, operating results for PAE are included in discontinued operations for all periods presented and its assets and liabilities are classified as held for sale on the balance sheet as of Dec. 31, 2010. The plan to divest PAE is a result of customers seeking a different mix of services that do not fit with the Corporation’s long-term strategy. The Corporation expects to announce a transaction to sell PAE in the first quarter of 2011.

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 exclusion of PAE and EIG from IS&GS’ results as they are both reported as discontinued operations.

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. The Corporation’s largest equity investments are United Launch Alliance (ULA) and United Space Alliance (USA), both of which are part of Space Systems.

Aeronautics

($ms) 4th Quarter Year-to-Date
2010 2009 2010 2009
Net sales $3,856 $3,250 $13,235 $12,201
Operating profit 410 426 1,502 1,577
Operating margin 10.6% 13.1% 11.3% 12.9%

Net sales for Aeronautics increased by 19 percent for the fourth quarter of 2010 from the comparable 200

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