Lockheed Martin. Differentiation Through Execution. Robert J. Stevens Chairman, President & Chief Executive Officer

Transcription

1 Lockheed Martin Differentiation Through Execution Robert J. Stevens Chairman, President & Chief Executive Officer Citigroup 21st Annual Global Industrial Manufacturing Conference March 4, 2008 Citigroup March 4,

2 Forward Looking Statements 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. results may differ materially due to: the availability of government funding and budgetary constraints; changes in customer priorities; the impact of continued hostilities in Iraq and Afghanistan on funding for defense programs; program and contract performance; return on pension plan assets, interest and discount rates, and other changes that may impact pension plan assumptions; the timing and availability of future government awards; the outcome of legal proceedings; the future impact of acquisitions, divestitures or joint ventures; 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 martin.com or at including our 2007 Form 10-K, contain more information on the types of risks and other factors that could adversely affect these statements. Citigroup March 4,

3 Lockheed Martin Global Security Company with Balanced Portfolio Aeronautics Space Systems 2007 Sales = $41.9 Billion Electronic Systems Information Systems & Global Services Electronic Systems $11.2B IS&GS $10.2B Aeronautics $12.3B Space Systems $8.2B Defense: Air Force Civil, HLS, Navy/USMC Intelligence, Army & Other 58% 27% Int l 15% Balanced Balanced Portfolio Portfolio with with Diverse Diverse Customer Customer Base Base Citigroup March 4,

4 Global Security Environment Uncertainty Regarding Today s s Threats & Tomorrow s s Emerging Threats Drives: Growth in US Demand US Defense and Intelligence Budget Remains Solid Homeland Security and Other Opportunities Also Growing Increasing International Demand Growing Demand for Defense and Intelligence Expanding Importance of Nation Building and Peacekeeping External Environment Drives Strategy Citigroup March 4,

5 Key New Business Awards/Pursuits Recent Awards IS&GS FBI Next Generation Identification Systems Aeronautics C-5B Modernization of 49 Aircraft Upcoming Pursuits Space Global Positioning Satellite III TSAT Next Generation Military Communications GOES-R Environmental Satellites Aeronautics C-130J India 6 Aircraft Electronic Systems Joint Light Tactical Vehicle Citigroup March 4,

6 Backlog History $76.9 $74.0 $74.8 $75.9 $76.7 Year-End Backlog ($ Billion) Maintained Backlog Above $74 $74 Billion For For Last Last Five Five Years Citigroup March 4,

7 Financial Execution History Operating Segment Margins (%) 12.0% 10.0% 8.0% 6.0% 4.0% 7.6% 7.8% 8.4% 10.2% 11.2% 9.2% 25.0% 20.0% Return on Invested Capital (ROIC) (%) 19.2% 21.4% 2.0% 0.0% % 10.0% 6.0% 9.6% 10.8% 14.5% 5.0% 0.0% Margin & ROIC Expansion for for Past Five Five Years Citigroup March 4,

8 Cash Flow Generation Cash From Operations ($M) 5,000 4,000 3,000 2,000 $1,809 $2,924 $3,194 $3,783 $4,241 Cumulative Cash From Ops ~ $16 Billion 1, Cash From Ops $1,809 $2,924 $3,194 $3,783 $4,241 Capital Expend Free Cash $1,122 $2,155 $2,329 $2,890 $3,301 Strong Cash Generation In In Excess of of Net Net Earnings Citigroup March 4,

9 Stock Repurchase History 2,500 2,000 $2,104 $2,127 Cumulative Repurchases Stock Repurchased ($M) 1,500 1,000 $772 $1,222 $6.7 Billion 94.3 M Shares 500 $ Shares (M) Dollars ($M) $482 $772 $1,222 $2,104 $2,127 Share Repurchase Focus Continuing $3.5 Billion of of Authority Remains Citigroup March 4,

10 Dividend History Dividends ($M) $199 $261 $405 $462 $538 $ Double Digit Increases to to Annual Dividends Citigroup March 4,

11 Shareholder Focus Goal: Return 50% of Annual Free Cash to Shareholders 3,000 2,500 $2,642 $2,742 Total Returned to Shareholders ($M) 2,000 1,500 1,000 $743 $1,117 $1, Dividends $261 $405 $462 $538 $615 Share Repurchase ,222 2,104 2,127 Total Returned $743 $1,117 $1,684 $2,642 $2,742 Returned $9 $9 Billion to to Shareholders over over Last Last Five Five Years Citigroup March 4,

12 Summary Lockheed Martin - A Global Security Company With: Balanced Portfolio of Capabilities to Meet Customer Needs Successful Track Record Strategy to Continue Building Value Lockheed Martin: Building Value for for Shareholders, Customers and and Employees Citigroup March 4,

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14 Definitions of Non-GAAP Measures Non-GAAP Financial Measures Disclosure This presentation contains non-generally Accepted Accounting Principles (GAAP) financial measures es (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 / Margin Segment Operating Profit represents the total earnings from our business segments before unallocated d corporate (expense) and income, interest expense, other non-operating operating income and expense, and income tax expense. This measure is used by our senior management in evaluating the performance rmance 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. 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. Management uses these measures to compare segment performance and d 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 Flow Free Cash Flow is calculated by subtracting Capital Expenditures from Cash From Operations Citigroup March 4,

15 Reconciliation to GAAP ($M) Sales $26,578 $31,824 $35,526 $37,213 $39,620 $41,862 Segment Op. Profit 2,020 2,468 2,976 3,421 4,031 4,691 Unallocated Corp. Expense (862) (449) (887) (568) (261) (164) Consolidated EBIT $1,158 $2,019 $2,089 $2,853 $3,770 $4,527 Segment Margin 7.6% 7.8% 8.4% 9.2% 10.2% 11.2% Consolidated Margin 4.4% 6.3% 5.9% 7.7% 9.5% 10.8% Citigroup March 4,

16 ROIC Calculation ($M, Except %) Net Earnings $500 $1,053 $1,266 $1,825 $2,529 $3,033 Interest Exp x Return $878 $1,370 $1,542 $2,066 $2,764 $3,262 Debt (Average) $7,491 $6,612 $5,932 $5,077 $4,727 $4,416 Equity (Average) 6,853 6,170 7,015 7,590 7,686 7,661 Benefit 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. Citigroup March 4,