In 2009, the FAS/CAS pension adjustment was ($114) million, which decreased net earnings by $74 million ($0.19 per share). In 2008, the FAS/CAS pension adjustment was $32 million, which increased net earnings by $21 million ($0.05 per share).

Electronic Systems:

Net sales for Electronic Systems increased by 4% for the first quarter of 2009 compared to the first quarter of 2008. The increase mainly was due to higher volume on air defense, tactical missile and fire control programs at Missiles & Fire Control (M&FC) and in simulation and training activities at Platforms & Training (P&T). These increases partially were offset by declines in volume on integrated defense technology programs and surface naval warfare activities at Maritime Systems & Sensors (MS2).

Operating profit for Electronic Systems increased by 7% for the first quarter of 2009 compared to the first quarter of 2008. The increase primarily was attributable to higher volume and improved performance on fire control and air defense programs at M&FC and the benefit recognized in the first quarter of 2009 from favorably resolving a simulation and training contract matter at P&T. These increases partially were offset by declines in volume on integrated defense technology programs and surface naval warfare activities at MS2.

Information Systems & Global Services:

Effective January 1, 2009, IS&GS redefined its lines of business to better align the segment based on its core customers and business activities. The new lines of business are as follows:

Civil – supports civil agency customer missions;

Defense – supports defense customer missions; and

Intelligence – supports intelligence customer missions.

The realignment had no impact on the segment’s operating results. The prior period amounts have been reclassified to conform to the new lines of business.

Net sales for IS&GS increased by 10% for the first quarter of 2009 compared to the first quarter of 2008. The increase in sales primarily was attributable to higher volume on enterprise civilian services in Civil and on mission and combat systems activities in Defense.

Operating profit for IS&GS increased by 5% for the first quarter of 2009 compared to the first quarter of 2008. Operating profit increases in Defense partially were offset by declines in Civil. The increase in Defense mainly was due to volume and improved performance in mission and combat systems, as well as readiness and stability operations. The decrease in Civil primarily was attributable to the absence in 2009 of a benefit recognized in 2008 for a contract restructuring.

Aeronautics:

Net sales for Aeronautics decreased by 1% for the first quarter of 2009 compared to the first quarter of 2008. The decrease in sales resulted from declines in Combat Aircraft that partially were offset by increases in Air Mobility and Other Aeronautics Programs. The decrease in Combat Aircraft mainly was due to lower volume on F-22 and F-16 programs, which more than offset increased F-35 volume. The increase in Air Mobility mainly was due to higher volume on C-130 and C-5 programs. The increase in Other Aeronautics Programs principally was due to higher volume on sustainment activities and on advanced development programs.

Segment operating profit increased by 10% for the first quarter of 2009 compared to the first quarter of 2008. The growth in operating profit primarily was due to increases in Combat Aircraft and Other Aeronautics Programs. The increase in Combat Aircraft operating profit primarily was due to higher volume and improved performance on the F-35 program and improved performance on the F-22 program. These increases more than offset declines in operating profit on F-16 programs. The increase in Other Aeronautics Programs principally was due to higher volume and improved performance on sustainment activities.

Space Systems:

Net sales for Space Systems increased by 2% for the first quarter of 2009 compared to the first quarter of 2008. During the quarter, sales growth in Satellites and Space Transportation partially were offset by declines in Strategic & Defensive Missile Systems (S&DMS). The sales growth in Satellites was due to higher volume in government satellite activities, which partially was offset by a decrease in commercial satellite activities. There were no deliveries in the first quarter of 2009 compared to one commercial satellite delivery in the first quarter of 2008. The increase in Space Transportation primarily was due to higher volume on the Orion program. S&DMS sales declined mainly due to lower volume on defensive missile programs.

Segment operating profit decreased by 8% for the first quarter of 2009 compared to the first quarter of 2008. During the quarter, a decline in operating profit at Space Transportation partially was offset by increases at Satellites and S&DMS. In Space Transportation, the decrease mainly was attributable to lower equity earnings on the United Launch Alliance joint venture and the absence in 2009 of a benefit recognized in 2008 from the successful negotiations of a terminated commercial launch vehicle contract. In Satellites, the increase mainly was due to higher volume and improved performance on government satellite activities. The increase in S&DMS primarily was attributable to improved performance on defensive missile programs.

Unallocated Corporate Income (Expense), Net:

Consistent with the manner in which the Corporation’s business segment operating performance is evaluated by senior management, certain items are excluded from the business segment results and included in “Unallocated corporate (expense) income, net.” See the Corporation’s 2008 Form 10-K for a description of “Unallocated corporate income (expense), net,” including the FAS/CAS pension adjustment.

The FAS/CAS pension adjustment (calculated as the difference between FAS 87 expense and the CAS cost amounts) resulted in an expense in 2009 compared to income in 2008 due to the negative actual return on plan assets in 2008 and a lower discount rate at December 31, 2008. This change is consistent with the corporation’s previously disclosed assumptions used to compute these amounts.

For purposes of segment reporting, unusual items are included in “Unallocated corporate income (expense), net:

2009 – There were no unusual items in the first quarter of 2009.

2008 – A gain, net of state income taxes, of $16 million representing the recognition of a portion of the deferred net gain from the 2006 sale of the corporation’s ownership interest in Lockheed Martin Khrunichev Energia International, Inc. and International Launch Services, Inc. At the time of the sale, the Corporation deferred recognition of the gain pending the expiration of its responsibility to refund advances for future launch services. This item increased net earnings by $10 million ($0.02 per share) during the first quarter of 2008.

“The Corporation is off to a solid start in the first quarter of 2009,” said Bob Stevens, chairman, president and chief executive officer. “Our team of 146,000 dedicated employees continues to focus on enhancing shareholder and customer value by utilizing the depth and breadth of our capabilities as the world’s premier global security company.”