Lockheed Martin Announces 2006 Fourth Quarter and Year-End Results

Lockheed Martin Announces 2006 Fourth Quarter and Year-End Results

* Fourth quarter earnings per share up 30% to $1.68; Full year earnings per share up 41% to $5.80

* Fourth quarter net earnings up 28% to $729 million; Full year net earnings up 39% to $2.5 billion

* Fourth quarter net sales up 6% to $10.8 billion; Full year net sales up 6% to $39.6 billion

* Cash from operations of $333 million for the fourth quarter; $3.8 billion for the full year

* Increased outlook for 2007 earnings per share and cash from operations

Lockheed Martin Corporation (NYSE: LMT) today reported fourth quarter 2006 net earnings of $729 million ($1.68 per diluted share), compared to $568 million ($1.29 per diluted share) in 2005. Net sales were $10.8 billion, a 6% increase over fourth quarter 2005 sales of $10.2 billion. Cash from operations for the fourth quarter of 2006 was $333 million.

Net earnings for the year ended December 31, 2006 were $2.5 billion ($5.80 per share), compared to $1.8 billion ($4.10 per share) in 2005. Net sales for the year ended December 31, 2006 were $39.6 billion, a 6% increase over the $37.2 billion in the comparable 2005 period. Cash from operations for the twelve months ended December 31, 2006 was $3.8 billion. Return on Invested Capital (ROIC) was 19.2% for the year ended December 31, 2006, compared to 14.5% in 2005.

“Our strategic, operational and financial performance for 2006 was solid and a tribute to our 140,000 employees and our leadership team,” said Bob Stevens, Chairman, President and CEO. “In 2007, we will continue to focus on our customers, shareholders and employees as we deliver on our commitments and foster a culture of innovation.”

It is the Corporation’s practice not to incorporate adjustments to its outlook and projections for proposed acquisitions, divestitures, joint ventures, or other unusual activities until such transactions have been consummated.

In December 2006, the Corporation completed the United Launch Alliance (ULA) joint venture transaction. As a result, the Corporation’s outlook for its 2007 net sales has been updated to reflect the completion of this transaction. The Corporation will no longer record sales on Atlas launch vehicles and related support sold to the U.S. Government as ULA will be accounted for under the equity method of accounting. Under this method of accounting, the Corporation will recognize its 50% ownership share of ULA’s earnings. The Corporation previously disclosed that its 2007 net sales outlook would be reduced by an estimated $800 million upon closure of the ULA transaction.

The Corporation’s outlook for its 2007 segment operating profit has been increased to reflect improved performance in its Aeronautics business area.

In addition, the Corporation’s outlook for its 2007 non-cash FAS/CAS pension adjustment has been updated to reflect the:

* selection of a 5.875% discount rate at the year-end 2006 measurement
date versus the 6.0% assumed in its prior outlook;

* actual return on plan assets in 2006 that exceeded the 8.5% return
included in its prior outlook; and

* benefit of pre-funding various pension trusts during the fourth quarter
of 2006.

Cash Flow and Leverage

Cash from operations for the quarter and year ended December 31, 2006 was $333 million and $3.8 billion. The Corporation continued to execute its balanced cash deployment strategy as follows:

* made a discretionary payment of $594 million in the fourth quarter to
pre-fund a portion of future years’ funding requirements for the
Corporation’s defined benefit pension plan trust;

* invested $39 million in the fourth quarter and $1.1 billion during the
year for acquisition activities;

* made capital expenditures of $440 million in the quarter and $893
million during the year;

* repurchased 2.3 million shares at a cost of $197 million in the quarter
and 27.6 million shares at a cost of $2.1 billion for the year;

* paid cash dividends of $149 million in the quarter and $538 million for
the year; and

* repaid $9 million of long-term debt in the quarter and $210 million
during the year, and paid a $343 million premium to complete a debt
exchange.

The Corporation’s ratio of total debt-to-capitalization was 39% at December 31, 2006, unchanged from December 31, 2005. The 2006 ratio includes the impact of the Corporation’s adoption of FAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” (FAS 158). The impact of adoption, together with the required re-measurement of the pension plans, resulted in a $1.9 billion decrease in stockholders’ equity as of December 31, 2006. At December 31, 2006, the Corporation had $2.3 billion in cash and short-term investments.

Segment Results

In January 2007, the Corporation changed the name of its Information & Technology Services business segment to Information Technology & Global Services (IT&GS) to better reflect the nature of operations in this business area. The Corporation operates in four other principal business segments: Electronic Systems, Integrated Systems & Solutions (IS&S), Aeronautics, and Space Systems. The results of Electronic Systems, IT&GS and IS&S have been aggregated and reported as the Systems & IT Group due to the common focus on information technology, systems integration and engineering solutions across these segments.

Consistent with the manner in which the Corporation’s business segment operating performance is evaluated, unusual items are excluded from segment results and included in “Unallocated corporate (expense) income, net.” See our 2005 Form 10-K for a description of “Unallocated corporate (expense) income, net,” including the FAS / CAS pension adjustment. Schedule “C” of the financial attachments to this release contains the current year values for the various components of “Unallocated corporate (expense) income, net.”