Jerry Kircher – VP, IR Bruce Tanner – EVP and CFO

Troy Lahr – Stifel Nicolaus Robert Spingarn – Credit Suisse David Strauss – UBS Cai von Rumohr – Cowen & Co. Joe Nadol – JPMorgan Robert Stallard – Macquarie Heidi Wood – Morgan Stanley Richard Safran – Goldman Sachs Carter Copeland – Barclays Capital Ronald Epstein – Merrill Lynch Doug Harned – Sanford Bernstein Howard Rubel – Jefferies & Co. Myles Walton – Oppenheimer & Co. Harry Nourse – Banc of America

Good day and welcome, everyone, to the Lockheed Martin Corporation third quarter 2008 earnings conference call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Jerry Kircher, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Teresa, and good morning everyone. I'd like to welcome you to our third quarter 2008 earnings conference call. Joining me today on the call is Bruce Tanner, our Chief Financial Officer and Executive Vice President. I would like to remind you that statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the Safe Harbor provisions of federal securities law. Actual results may differ. Please see today's press release and our SEC filings for a description of some of the factors that may cause actual results to vary materially from anticipated results. We have posted charts on our website, which supplement our comments today, including details of the financial outlooks by business area for both calendar years 2008 and 2009. With that, I would like to turn the call over to Bruce.

Thanks, Jerry. Good morning, everyone, and welcome to the call. In this period of market turbulence I appreciate your support and interest in Lockheed Martin as we continue to execute on our strong portfolio of programs. I would like to begin by stating that we had a solid third quarter with strong operational and financial contributions from each of our four business areas. Our results reflect excellent performance across the Corporation and are enabling us to continue our momentum as we work to provide value to shareholders and customers. Before I move into specific details of the third quarter accomplishments and performance, I want to offer a brief perspective on how the Corporation is positioned within the financial environment as well an assessment of the recently approved FY09 defense budget. At an operational level we continue to see minimal effects to our activities from the current financial environment. With the vast majority of our revenues being funded by the U.S., we are fortunate to have a relatively insulated market position. Support from our subcontractor and supplier base remains solid and we continue to have access to required raw materials to enable execution of programs. Our liquidity position remains strong with $2.5 billion of available cash on the balance sheet at the end of the third quarter. Our cash and short-term investments provide excellent liquidity for the Corporation and we have also focused on safety and liquidity over yields in our deployment of assets. We remain on track to generate cash consistent with net earnings further demonstrating our long-established excellence in cash generation. In the area of debt we have no commercial paper outstanding or required. Our $3.8 billion in outstanding debt consist entirely of fixed-rate instruments (inaudible) by low capital leverage ratio of 28%. Looking forward, we have less than $250 million in scheduled debt retirements from now through 2012 and we continue to have adequate access to both short- and long-term debt markets. On a non-operational level, the difficult market conditions have resulted in 2008 returns on invested assets underperforming expectations. Reductions in market returns have resulted in recognition of unrealized losses on marketable securities held to fund certain non-qualified employee benefit obligations. Despite these non-operational headwinds, our excellent cash generation, low debt level, and solid financial results have enabled our financial foundation to remain strong in this market environment. We will continue to remain alert, agile, and opportunistic in response to changing financial and market conditions as we navigate through this dynamic period and satisfy our commitments to customers, shareholders, and employees. Moving to the defense budget, the FY09 DoD appropriations bill was recently signed into law by President Bush at $512 billion. This core defense budget reflects growth of approximately 6% above 2008 levels and provides solid support for our products, including funds for extensions and growth on a number of key programs. Our portfolio of programs is expected to grow consistent with the DoD core budget, driven primarily by strong future growth on the F-35 Joint Strike Fighter Program. Specific items approved in the new budget includes funds for the third LRIP contract on the F-35 Joint Strike Fighter; eight C-130J aircraft; $523 million for lot 10 long-lead procurement activities on the F-22 Raptor; two Littoral Combat Ships; and $735 million for Increment One work on the VH-71 presidential helicopter. This budget reflects the bi-partisan recognition of the need to replace critical aging assets through recapitalization activities. With FY09 appropriations being expended over the next few years, this budget provides a solid foundation and visibility of work in calendar years 2009 and 2010. The new core budget will also add to our existing $76 billion backlog and further position us to grow revenues in 2009 and beyond. Looking at the FY09 supplemental budget, an initial (inaudible) of $62 billion was approved to continue to fund activities in Iraq and Afghanistan on an interim basis. Determination of the final level of the 2009 supplemental budget will be made in the upcoming administration next year after evaluation of in-theatre requirements. Supplemental budgets have declined from their peak in FY08 and are likely to be reduced in the future as resources are redeployed for other spending requirements. We do not see material impacts on our business portfolio from any future reductions to supplemental budgets. Turning to our third quarter results, the Corporation had strong operational performance with segment operating margins of 11.8%, cash generation of over $1 billion, growing backlog by $1.5 billion, continuing our share repurchase activity, and increasing our quarterly dividend by 36% to $0.57 per share. Based on year-to-date performance we are increasing 2008 full-year financial guidance for segment operating profit, earnings per share, and return on invested capital. Details of the new increased guidance are outlined in the webcast charts and in today’s press release. Let me now highlight some of the recent new business awards and operational achievements in each of the business areas starting with Aeronautics segment. Key international and domestic new business awards were won this quarter that enabled expansion of Aeronautics backlog by approximately $900 million. International awards include the receipt of a $394 million contract from Qatar to purchase four C-130J’s plus spares and training support. Qatar becomes the ninth nation to purchase the C-130J aircraft and joins the rapidly growing number of nations utilizing the C-130J’s in their fleets. Operationally, Aeronautics continues to excel in multiple areas. The F-35 Joint Strike Fighter achieved the 50th flight of the conventional takeoff and landing aircraft and successfully completed a three-hour cross-country flight to Edwards Air Force Base, landing Code One with no problems. The short takeoff/vertical landing aircraft continued preparation for receipt of the new redesigned engine from the government in January 2009 and the first STOVL flight planned in early 2009. The F-22 Raptor program accomplished two key events this quarter with achievement of over 50,000 flight hours for the fleet and receipt of the prestigious Department of Defense Performance Based Logistics Service System Level Award. This annual award is presented by the Office of the Secretary of Defense to the best PBL contractor. The F-22 program was recognized as exemplary for their achievement of providing higher aircraft readiness rates to war fighters and lower cost to taxpayers. Additionally, the Aeronautics Skunk Works unit received the National Medal of Technology and Innovation from President Bush at a recent White House ceremony. This award conveys the nation’s highest honor to corporations or individuals for their outstanding contributions to United States through their technological innovation and is an affirmation of the thought leadership of the Corporation in designing critical new technologies and solutions for the nation. In Electronic Systems, we continue to win key new business awards and achieve operational milestones for customers. New business wins included the Defense Logistics Agency award of the Fleet Automotive Support Initiative-Global contract. This contract will leverage the Corporation’s expertise in performance based logistics and global supply chain management by providing sustainment work for all of the U.S. military’s land based vehicles over the next 10 years. This sole sourced ID/IQ contract has a potential value of up to $5.6 billion. Electronic Systems was also notified of their selection by Canada for two contracts totaling approximately $2 billion. The first contract, valued at $1.4 billion, will modernize the command and control systems on 12 Halifax Class Navy frigates. The second contract for $600 million will provide long-term in-service support of the ship’s combat systems. These contracts will enhance cooperation with Canada and expand the growing international revenues within the Electronic Systems segment. Key operational accomplishments were also achieved this quarter by Electronic Systems. In our shipbuilding area, the Littoral Combat Ship program successfully conducted acceptance sea trials of our inaugural ship, Freedom, with a demonstration of the ship’s speed, maneuverability, and unique capabilities. This success resulted in the delivery and acceptance of this innovative vessel for the U.S. Navy and provides the first Littoral Combat Ship to the nation. With the FY09 defense budget containing approved funds for two new ships we look forward to placement of new ship orders by the Navy as soon as possible so it can help support their need to construct the 55-ship fleet of this new class of warships. The VH-71 presidential helicopter program achieved a major milestone this quarter with completion of the maiden flight of the first operational pilot production aircraft. This program continues to gain momentum on Increment One activities as we move towards delivery of these much-needed aircraft to the Marine Corps and White House. I will move next to our Information Systems & Global Services segment. IS&GS continue to leverage their portfolio of total systems offerings as shown by their success in securing new business awards. This quarter, IS&GS was awarded a $300 million contract to support the 2011 census for England, Wales, and Northern Ireland. This award builds upon their legacy expertise in providing census support to the U.S., Canada, and United Kingdom. Additionally, the U.S. Air Force selected IS&GS to compete for contracts under their Future Flexible Acquisition & Sustainment Tool program. This selection allows IS&GS to compete for development, modification, and maintenance work task orders under a 10-year ID/IQ contract program with a potential value up to $6.9 billion. IS&GS continue their expansion of business with other government agencies with a selection by the Department of Energy to provide a broad range of site services to the DoE Hanford site. The program has a potential value of $3 billion over a 10-year period. Although this program has been placed under protest by a competitor, we look forward to successful protest resolution, so work can proceed. While we did not recognize the Hanford order this quarter due to the open protest, IS&GS still achieved a record backlog level in excess of $12 billion. The record backlog has IS&GS well positioned to achieve their double-digit revenue growth goal. We expect IS&GS to continue to have the highest revenue growth rate of all of our business areas. Finally, the Space Systems segment also continued to win new awards and demonstrate operational excellence. NASA selected Space Systems to design, build, and operate the spacecraft for the Mars Atmosphere and Volatile Evolution program. This $485 million project will analyze the upper atmosphere and past climate change on Mars. The maiden mission builds upon the long history of successful inter-planetary expertise of the Space segment and expands upon their position as the world’s largest space company. Operationally, the Trident Fleet Ballistic Missile for the U.S. Navy achieved its 124th consecutive test launch, extending a record of success back to 1989. These operational accomplishments and important new business wins across all of our business segments have us well positioned for future financial growth. Before turning to your questions, I would like to provide a little color on our 2008 and 2009 guidance. As you’ve seen in our press release, the revised 2008 guidance reflects increases in our segment operating profit, earnings per share, and return on invested capital. These increases were partially offset by the recognition of unrealized losses on marketable securities held to fund certain non-qualified employee benefit obligations. Consistent with our expectations and goals, the 2009 guidance projects top line revenues returning to a more robust growth rate of approximately 6%, the range midpoints. Our guidance also projects achievement of our previously stated goal to accelerate the generation of $5 billion in segment operating profit end of 2009, achieving a one-year acceleration from our prior goal date of 2010. Cash from operations in 2009 is projected to be at least $4 billion and reflects continued strong cash generation. Finally, we expect to remain an industry leader in 2009 with return on invested capital projected to be greater than 20%. Regarding assumptions for our FAS/CAS adjustments to earnings, our 2009 outlook is based on a projected discount rate of 7.5% and 2008 return on pension assets of negative 25%. Recent volatility in the financial markets has intensified the challenge of trying to accurately estimate the discount rate we will use at the end of 2008 or the return on our benefit plan assets. We have included a schedule in today’s web charts that provide sensitivity ranges of various changes and concern [ph] on plan assets for your reference. The data table represents the results of these various assumptions on the 2009 projected FAS/CAS pension adjustments and associated cash contributions. Consistent with our historical practice, we will establish final assumptions on the discount rate and our final actual 2008 asset return value after the close of the year, and provide any updated guidance in our January earnings call. In summary, our financial performance, operational accomplishments, and new business wins across all of our business segments this quarter have us well positioned for increased financial growth in 2009 and beyond. Our diversified portfolio and solid financial foundation will serve us well as we move forward in creating value for customers and shareholders. I would now like to open up the line for your question. Teresa, would you please open the line?

Thank you. (Operator instructions) We will go to Troy Lahr, Stifel Nicolaus. Troy Lahr – Stifel Nicolaus: Thanks. Just wondered if you can highlight some of the moving pieces in ’09 for the Space Systems segment with the flat sales that you are calling for and how that’s impacted by TSAT?

Sure. Thanks Troy. Yes, taking a look at Space, you said Space sales are fairly flat going from ’08 to ’09 that’s probably a pretty accurate depiction. I think there is a couple of things going on there. One, we have one less commercial satellite. In 2009 we have none – in 2009 whereas we did have one in 2008. Second, we have one commercial launch in 2008, we have zero commercial launches in 2009. That’s partially offset by higher activity in our government satellites business, a lot of that coming from our increased effort in the GPS III effort as well as our AEHF activities. You asked about TSAT. TSAT – I’ve read the press release but there (inaudible) on the press – on that contract, but there has been no official word at least that we have received yet from the U.S. government relative to TSAT’s continuing forward or not. We do have TSAT kind of on a pro-rated basis or a de-rated [ph] basis in our outlook. It will create probably some pressure on our overall sales level in Space. In fact that activity or that contract was not awarded [ph]. Troy Lahr – Stifel Nicolaus: But if TSAT goes away, does that mean you could benefit from a more Advanced EHF then do you think?

Yes, the expectation let’s talk about what TSAT is. I mean TSAT is kind of the follow-on to secure communications. And we kind of started this business with the Milstar contract years ago. AEH is kind of the current version of that. And then TSAT was sort of the next laser-based secure communications systems. So we are the incumbent with the AEHF satellites I mean the expectation I have I think would be that we will continue to sell those and perhaps spiral those (inaudible) TSAT and not materialize. Troy Lahr – Stifel Nicolaus: Okay, thanks.

Thank you, Troy.

And our next question comes from Robert Spingarn, Credit Suisse. Robert Spingarn – Credit Suisse: Good morning, Bruce, Jerry.

Hi, good morning.

Good morning. Robert Spingarn – Credit Suisse: Let’s talk about Aeronautics for a minute. If you could walk us through the moving pieces in Aeronautics, and in the fourth quarter it looks like you’ve got fewer F-22’s and F-16’s, if you could talk about that a little bit. And then maybe move in to F-35 outlook for the next couple of years in terms of timing on the LRIP’s from a revenue and margin perspective.

: And I think you asked about the F-35 revenue growth and margin. Interesting thing is going on with F-35. We literally are expecting to see – well, let me break it into pieces, the SPD contract kind of the development contract on the F-35 program has hit its peak and we are actually seeing that start to wind down now. So from ’08 to ’09 we actually see about $1 billion of reduced development effort on that contract. Conversely, we are seeing the ramp up on the early LRIP contracts, the Low-Rate Initial Production contracts. So, we expect to see close to $2 billion of growth from 2008 to 2009 on the LRIP contracts. Between the two of those events we are expecting to see F-35 grow at about 25% cliff year-over-year from 2009 to 2008, comparing those two years. We do expect to have some slight margin improvement in 2009 on the F-35 contract as we do expect to have some risk retirements that allow us to take the booking rate on that particular – the developmental contract up and we are also seeing the activity of the production contracts, which are starting to be booked at about a level comparable to what we are seeing on the development contract. And— go ahead, I am sorry. : And I think you asked about the F-35 revenue growth and margin. Interesting thing is going on with F-35. We literally are expecting to see – well, let me break it into pieces, the SPD contract kind of the development contract on the F-35 program has hit its peak and we are actually seeing that start to wind down now. So from ’08 to ’09 we actually see about $1 billion of reduced development effort on that contract. Conversely, we are seeing the ramp up on the early LRIP contracts, the Low-Rate Initial Production contracts. So, we expect to see close to $2 billion of growth from 2008 to 2009 on the LRIP contracts. Between the two of those events we are expecting to see F-35 grow at about 25% cliff year-over-year from 2009 to 2008, comparing those two years. We do expect to have some slight margin improvement in 2009 on the F-35 contract as we do expect to have some risk retirements that allow us to take the booking rate on that particular – the developmental contract up and we are also seeing the activity of the production contracts, which are starting to be booked at about a level comparable to what we are seeing on the development contract. And— go ahead, I am sorry. Robert Spingarn – Credit Suisse: Well, I was going to ask you just give us a little trajectory on F-35 revenue growth into ’10 [ph] based on what you talked about, the 25% type of number, and in ’09 based on what the current schedules are.

Yes, I don’t have the number off the top of my head, Rob, to be honest with you, but we expect to see very similar levels of growth going from ’09 into ’10 at the current rates. We are still on track. I think we’ve talked about, within Aeronautics having, Aeronautics get to about $20 billion a year business area by 2015. F-35 is probably $15 billion-$16 billion of that – that timeframe. So we will be honest, I would like to have to reach those between 2010 and 2015. Robert Spingarn – Credit Suisse: Okay. And then just my follow-up question is on share buyback cash deployment. Well, your guidance for ’09 contemplates what kind of share count and can we assume that that – well, why don’t I ask you that question first – and then does that contemplate share repurchase?

We expect to continue our standard practice at least as we outlook 50% of return of free cash flow in the form of dividends or share repurchases. If you just walk that through with our assumption for 2009, that would result in about 403 million shares outstanding is we are kind of considering. We will give you the guidance for next year. Robert Spingarn – Credit Suisse: Okay, thanks very much.

Thank you.

And we will go next to David Strauss, UBS. David Strauss – UBS: Good morning.

Good morning. David Strauss – UBS: Bruce, can you give the breakout in terms of your assumptions for FAS and CAS, what exactly you are assuming for FAS and CAS and then also if you kind of assume in 2009 that you hit your assumed rate of return and the discount rate doesn’t change in ’09, given the smoothing mechanism that you used, would you anticipate that pension expense in 2010 would be higher again than 2009?

Yes, let me give you the piece as I think – and I hope the – by the way, I hope the table that we provided in both the web charts and in our discussions that we have had, I hope those were helpful as far as helping to understand the – there is a lot of volatility more so than years past especially just in the last 45 days with returns on the assets in our pension plan as everyone else has experienced during this (inaudible) time. I think the pieces – I walk through the pieces first – our cash expense in 2008 is about $590 million. Debt stays fairly flat as we look into 2009. The FAS expense, as we sit here today, in 2008 is about $460 million plus. And we expect that to grow to somewhere in the $640 million-$650 million range in 2009. And again I am a little hesitant, David, to talk about what happens in 2010 only because we haven’t settled 2008 yet. But at the current levels you would expect to see some increased expenditures in 2008 (inaudible) where we are today as we sit here in the middle of October. David Strauss – UBS: Okay, fair enough. Looking at Electronic Systems, could you talk about I guess in the quarter Missiles and Fire Control sales were up but profit was down. What was going on there, and as well kind of the outlook by business within ES for 2009.

Yes, you read that right. Missile and Fire Control sales are up – revenue or excuse me profit was little bit down, not for any sort of operational reasons whatsoever. We just had some higher growth on some lower-margins programs. I think to name two I mean we got the (inaudible) program some of the Sniper activity that was higher in the third quarter of ’08 compared to third quarter of ’07. Those are a little lower than the outstanding returns, the Missile and Fire Control typically generates. But again, nothing operational, it’s just kind of the mix of business going forward. And then you asked about – I am sorry, going into next year— David Strauss – UBS: Yes, the outlook by business within ES.

Yes, within ES, we see continued growth really driven – the biggest growth (inaudible) the overall growth of Electronics, we still expect to be probably in the mid-single digits, have a steady 85% [ph] like we always get, it’s driven predominantly growth wise next year by our PT&E line of business, the Platform, Training & Energy piece of the business, and a large part of that is we expect to have because of the funding I mentioned in the prepared comments, we did expect to have higher sales values on the VH-71 program, the Increment One piece. And we are also seeing higher growth on our other rotary platforms including the MH-60 (inaudible). So, PT&E growth a little faster than the overall Electronic Systems average. MS2, Maritime Systems & Sensors, and Missiles and Fire Control grow a little bit slightly behind the average growth rate of Electronic Systems, but both fairly consistent to each other. David Strauss – UBS: Great, thanks Bruce.

You bet.

Our next question comes from Cai von Rumohr, Cowen & Co.. Cai von Rumohr – Cowen & Co.: Thank you very much. So, it looks like your advance is quite up in the third quarter. Can you give us any update, any more optimism that that continue up given your foreign [ph] sales prospects.

Yes, we – actually, Cai, we see probably a little bit of deterioration in these (inaudible) towards the end of this year. And as we look into next year, it’s always hard to predict when the international customers will actually get tied under contract and what exactly we can arrange from a terms and conditions that would allow those sorts of advance payments. But I would think our activity going into 2009 will be fairly consistent with what we saw in 2008. Cai von Rumohr – Cowen & Co.: Okay, okay. And it looks like your DSOs went up a little bit. Is that anything – what’s the reason for that and is that expected to reverse as you go into the fourth quarter?

No, we actually expect – I mean I think teed up in the second quarter, we thought the working capital was going to grow some towards the end of the year. That’s what we are seeing. I expect we’ll see in 2009 some further working capital growth about consistent with what we saw in 2008. So, not a great surprise there. Cai von Rumohr – Cowen & Co.: Okay. And then, the last one, any change in your thoughts on capital deployment given kind of the credit situation like you kind of have in your profile what you might do in terms of the pension plan, any thoughts on maybe kind of putting more money than that in and what would the tax implications of that be?

More money in the pension plan, Cai? Cai von Rumohr – Cowen & Co.: Yes.

I think the bottom line view point that we have as far as cash and cash deployment is wherever we have opportunities and if we see opportunities to either make acquisitions or if we think there is a better benefit to deploying that cash early into the pension plan, we will make that call, but at this point in time I don’t necessarily have a strong inkling for one or the other. It’s going to be very opportunistic as we go forward. I think our cash deployment practice have been fairly transparent in the past and we will make sure they are going forward. Cai von Rumohr – Cowen & Co.: Thank you.

Thank you.

(Operator instructions) We will go next to Joe Nadol, JPMorgan. Joe Nadol – JPMorgan: Thanks, good morning.

Hi, Joe. Joe Nadol – JPMorgan: Just a couple of questions, well, one two-part question on the sales outlook for next year. In Aeronautics why is the rest of the business shrinking ex-F-35, particularly when C-130 should be ramping up? And secondly, it looks like the organic growth rate in IS&GS is in the single digits. We had expected that to be more like in the low-double digits. Is there a change in expectation there?

: You mentioned C-130, C-130’s we actually are seeing some growth. We are expecting 16 C-130 aircraft in 2009 compared to 12 in 2008, so you will see some growth there. And then lastly I guess it may be a little bit of down activity in some of the other Aeronautics, R&D those sorts of activities, but fairly minor from that point. Next you talked about IS&GS and the organic growth rate. We have given at this point, guiding – I think we have given the range guidance at the top line of 9% to 11%. I think that’s very consistent with what we have talked about in terms of – I am sorry, it’s about 8% to 11%. I think that’s very consistent with the – with our expectation of double digit growth. I think there is still a great opportunity to achieve that. If we take a look at what we have been able to do with IS&GS over this year as we look forward next year, we are currently generating a $1 billion of organic growth year-over-year. So that’s something we take great pride in and I think the percentages were worked out. As we continue to win new business in the latter part of this year, we got a great stream and a great record this year of wins in IS&GS and if we can continue that going forward I think that will position us very well for 2009 as well. Joe Nadol – JPMorgan: Okay, thanks for that, Bruce. And then just as a follow-up, looking at the fourth quarter of ’08, it seems like – is it fair to say that you must be looking for the upper end of the range for operating profit specifically. You can take kind of the middle and you look at what you have done so far this year, you have done more than three quarters of it, and typically your fourth quarter is obviously a higher quarter than the other three. So, is it fair to say upper end of the range there?

I will try to – (inaudible) answering that question, I will try to give you some pretty specific guidance. I think we tried to do that in the second quarter as far what we expected to see in the third quarter. As we look at fourth quarter I think fourth quarter is going to be slightly higher than third, but maybe not quite as high as fourth quarter of 2008. Again, I think we are going to see some downturn in the Aeronautics business. It kind of mitigates some of that a little bit relative to what maybe you might be expecting there. So, numbers in the 10-7, 10-8 range would be – about what I am expecting there. Margin wise, I think operating margin, we are seeing strong performance and I – we expect to still see strong performance in the fourth quarter for all four business areas. I think Space will be down somewhat because of the mix of ULA. The equity earnings that we receive from ULA in the fourth quarter will be probably a little less than what we have seen for the first three quarters simply because of the mix of activity in that quarter. And then the last thing that’s going to put some pressure on our overall margin (inaudible) time, is we had teed up I think if you look at the web charts and some of our press release information, we have teed the fact that we have some non-qualified employee benefits that are kind of mark-to-market. These are consolidated activities that do flow through the P&L account. And we had about $30 million item in the third quarter. We are actually expecting about $80 million as we sit here today. These funds are invested similarly to how we invest our pension returns. And if you kind of put the same extrapolations on those funds in the fourth quarter, it says we have got about $80 million headwind on those assets in the fourth quarter. That’s also included in our guidance for the rest of this year, Joe. Joe Nadol – JPMorgan: Okay. Thanks, Bruce.

Thank you.

And we’ll go next to Robert Stallard, Macquarie. Robert Stallard – Macquarie: Good morning.

Hi, Rob. Robert Stallard – Macquarie: Bruce, first of all, on LCS, you mentioned that there have been a couple of boats put into the FY09 budget. Have you had any clarity under what contractual terms the DoD is expected to award those contracts?

We have had discussions – I think that’s still an open item, Rob, to be honest with you. Robert Stallard – Macquarie: Because in the past you said you wouldn’t accept fixed price development. Is that something the Navy is still looking at?

Yes, I don’t think – I think that’s still with their position, Rob, we would not like that fixed-price development. I think maybe a better question is would there be development on the next LCS or not. And that’s kind of the point that we are having discussions with the Navy on. Robert Stallard – Macquarie: Okay. And as a follow-up, on the pension, I was wondering if you could clarify what is in the pension at the moment in terms of the weightings of equities debt.

Yes, we have got – I guess what you might expect most portfolios of this size to have in terms of weightings, we have got both U.S. equity and international equities, so that’s probably in the – 55%-60% range or so. We are probably between bonds and some other alternative investments, cash, some –actually some commodity type of things. Bonds is probably in the 30%, 35%, 40% range and the difference is in the alternative investments. So, fairly, I would think, standard for most – those portfolios with pensions. Robert Stallard – Macquarie: Has there been any exceptional losses in the pension fund this year?

No Robert Stallard – Macquarie: Okay, thank you.

Thank you.

And our next question comes from Heidi Wood, Morgan Stanley. Heidi Wood – Morgan Stanley: Good morning.

Hi, Heidi. Heidi Wood – Morgan Stanley: I wanted to touch on Space in a little more detail, Bruce. Can you talk about the profitability in Space this quarter, break out a little bit of – you had said the drivers were ULA, higher Orion volumes, and then negotiation on a commercial contract – on change in the contract terms. Can you talk to us about how those led to the 12.8% margins?

Yes, you are looking at third quarter, Heidi? Heidi Wood – Morgan Stanley: Yes.

Yes, we had strong ULA earnings in the quarter and again that’s kind of a mix of the launch vehicles that occurs in ULA as well as some just good performance that occurred in the third quarter on ULA and we got our share of that in the quarter. On top of that we had good performance in our government satellite business. We actually had some performance improvements there as well. And we didn’t – (inaudible) we didn’t have the – any of the terminated launch – (inaudible) to be honest with you that was not a third quarter event. There was a commercial item, the termination of a commercial launch that occurred in the first quarter. That might be where some of the confusion is. There was nothing in the third quarter. Heidi Wood – Morgan Stanley: Oh I am sorry, okay. What – I am reading the results of the successful negotiation of a terminated contract long-service, oh that’s the first quarter–?

That was the first quarter, exactly. Heidi Wood – Morgan Stanley: Alright. But then what I am trying to get a better handle on is puts and takes as to the sustainability of this 12.8% margins as we go forward into 2009?

Yes. Heidi Wood – Morgan Stanley: You talked before about revenues earlier, but I would like to get more clarity about the profitability for next year.

Yes. I think the guidance we are providing for 2008 that’s probably fairly close to – I don’t – let’s back up – I am not sure the 12.8% is sustainable. I think third quarter was high for that – for the reasons I have given you relative to ULA and some profit step-ups we did on our government satellite business. As we look into 2009, I think it’s going to be comparable to what we see in 2008. Maybe the one wild cared there is that 2008 did have the terminated satellite event that you talked about in the first quarter, which actually might be (inaudible) in 2008 that we do not see in 2009. Heidi Wood – Morgan Stanley: Okay. And secondly, can you talk a little bit about your thoughts on M&A? There hasn’t been a lot activity for you guys. It’s been fairly selective and niche, but now that we have got on the equity side so many properties beaten up, one would imagine that on the private side we are probably seeing something like that as well. Do you see yourself getting more active strategically in 2009?

Yes. No, Heidi, I think we just – we have done four acquisitions so far this year. we did several small in the third quarter. A couple of items we did acquisition of (inaudible) and Nantero. A couple of acquisitions that might not have gotten a lot of press. We also bought out the other half of our RLM stake in the Australian business down there. I did see the portfolio as we are looking at it – it’s a very good pipeline of opportunities going forward. We are very selective in the process we use. I think we got a – hopefully a recognized that this is one approach for how we approach this. I do think the valuations had been helped here recently by the recent events. So I am optimistic that that will create some better opportunities than we have seen here in the last year or so. Heidi Wood – Morgan Stanley: Great. Thanks very much.

Yes, thank you.

We’ll go next to Richard Safran, Goldman Sachs. Richard Safran – Goldman Sachs: Hi, good morning.

Hi, Rich, how are you? Richard Safran – Goldman Sachs: Very good, thanks. This year we have seen a number of competitions really sliding to the right, delayed for one reason or another. So, just from what you are seeing, is this any indication of the government having difficulty funding or is it that you think there is some other factor at work?

I don’t know if the government is having funding – having any difficulty funding per se. I think it’s probably other matters at work including the change of administration and not wanting to put something new on the plate the day the new secretary walks into the job. I think it’s a bit of a mixed bag as we look at the current environment. I mean there is a number that we are interested in. It’s some kind of start activities. I think we see, for instance, a JLTV, we believe that one actually will take place this year. we are pretty confident that that will take place. Conversely, the CSAR activity seems to be pushing forward to the right. And again, I mentioned earlier that TSAT seems to be in a bit of state of flux as we speak here, but I think overall new starts are going to be difficult in today’s environment particularly the closer we get to a change in administration. But I don’t see it necessarily because of funding situations that you described. Richard Safran – Goldman Sachs: Okay. And next thing. One issue that had been giving indications of is that small aerospace and defense (inaudible) have been having some trouble obtaining financing just what they need to run their business on a day-to-day basis.

Yes. Richard Safran – Goldman Sachs: This is just obviously as a result of current market conditions and I just wanted to know if there is an issue here where Lockheed and even some other large cap defense firms that can be required to use cash to help the supplier base.

Yes. That’s a good question, Rich. We’ve been monitoring this for at least the last – I don’t know – three, four months, pretty heavily. And we are going to continue to monitor that very, very closely. Frankly, we have not seen impacts to our supply base of the type and nature that you described there. We have actually been very pleased with the lack of finding those situations in our supply base. We are going to continue to watch that very closely, and as far as the latter part of your question, as far as would we use cash, that’s – since I don’t have that situation right now, it’s kind of pure speculation that I am not sure I want to get into it at this point because we don’t have that situation. Richard Safran – Goldman Sachs: Thanks a lot.

Thank you.

We’ll go next to Joe Campbell, Barclays Capital. Carter Copeland – Barclays Capital: Actually, it’s Carter Copeland. Good morning, guys.

Hi, Carter.

Good morning, Carter. Carter Copeland – Barclays Capital: Just a few points – questions for clarification. On Aeronautics, I don’t mean to beat a dead horse here, but it’s – if we just walk through the moving pieces, it sounded like F-16 is roughly offset by F-117 sustainment losses. I think you said a billion of growth on F-35. Seems like C-130 should be another couple of hundred million dollars yet the guidance implies $750 million of growth. So I am just wondering what that gap is. I know you said there is some other aerospace R&D going down but presumably sustainment should be up on programs like F-22. So, I am just trying to – wondered if you can help bridge the gap here a bit. It seems like a pretty big one.

Yes, I don’t know if it’s all that big a gap. I think one of the things that might be missing there is we are still seeing – we are seeing actually a little bit of reduction in F-22 cost volume. I think most of that’s for all the right reasons as we have experienced performance improvements on that front. So that’s some of the reduction. And then kind of the rest of the Aeronautics business, the non-plat – I shouldn’t say non-platform but the non-major four programs, if you will, F-16, F-22, F-35, C-130’s. That part of the business is down a little bit year-over-year as well. Some of that, for instance, I mean to just to name one firm that’s in that mix of the fray is the U-2 program, for instance. Carter Copeland – Barclays Capital: Okay.

We don’t talk about a lot of those kind of smaller pieces, but that’s what is driving some of that next year. Carter Copeland – Barclays Capital: Okay. And then another one here for clarification on David’s question, Missiles and Fire Control, I read the release to take it that the actual amount of profit was down yet the comment that you had higher growth in lower margin programs seems to suggest that the margin was down. Was there in fact something that declined here to give us less profit, not less margin.

I am looking at it – actually profit is down in part because we had such a tremendous level of profit in – third quarter2007, very, very high margin. As I look at the margin in the third quarter of ’08, it’s still in line with the overall Electronic Systems profit rate. So I don’t – again, I don’t think there is any issue there. And there was a mix issue between the programs that happened in the third quarter 2007 versus third quarter 2008. Carter Copeland – Barclays Capital: They are just comps.

It was just comps (inaudible) Missiles and Fire Control is still having a tremendous year. No performance issues there to describe whatsoever. Carter Copeland – Barclays Capital: Okay. And the last one on pension. The table you provided is very helpful but I wondered if you had done any sensitivity analysis around the discount rate. If we didn’t in fact keep spread wide for the back portion of this year and in fact the discount rate was not 7.5% but 7%, how that might change your table, any insights there would be really helpful.

Yes, we have looked at and honestly we thought about adding some of those in the table. We thought it might just get too much too quickly. There is less sensitivity in the discount rate, obviously. I think every 25 basis points on the discount rate it’s probably worth like $20 million or $30 million bucks, something along those lines. So, nowhere near what the asset value change at work. Carter Copeland – Barclays Capital: Okay. Thank you.

Yes.

Our next question comes from Ronald Epstein, Merrill Lynch. Ronald Epstein – Merrill Lynch: Hey, good morning guys.

Hi, Ron.

Good morning. Ronald Epstein – Merrill Lynch: Bruce, were you the guys the beneficiary of the 2006 Pension Reform Act? And if you were, when did that roll off, I mean when do you have to start taking some action that possibly got delayed because of the–?

I think defense contractors in general were treated a little differently in the PPA in that we have more time to get the full funding than does most of the rest of industry. Ours is – I believe I now have a number that’s on my head – it’s 2010 or 2011, and in large part that’s because we have – one of the reasons we have the FAS/CAS adjustment is because there is this difference of methodology between the way we recognize expenses on our cost accounting standards versus the way we recognize expenses under the financial accounting standards. And that’s what’s called harmonization between the CAS and FAS that’s yet to take place and that’s what the industry is waiting on before we can make that decision. Ronald Epstein – Merrill Lynch: So, you would have to be – I think it’s funded by 2011, that’s what you are taking right?

Yes, we actually you hit the requirement just fit full funding but you actually have a period of time and I believe the period of time is like seven or eight years to reach full funding post that date. Ronald Epstein – Merrill Lynch: Okay.

So, it’s not as if you have to have full funding as of that date, if that makes sense to you. Ronald Epstein – Merrill Lynch: Yes, that makes sense. And then just one quick follow-on and I think maybe this is related to Richard’s question. If you look at the cancellation of ARH and the push out of TSAT if that what eventually happens, I mean what that means of the C-5 re-engining, the VH-1. I mean why do you ever think that the DoD seem to be being a little more scrutinize over programs lately.

Yes, I can't talk to the ARH I mean I can only see what I got – read over on the ARH, so I really don’t want to comment on that. TSAT is clearly a question of whether or not the customer needs that sort of additional capability or whether or not they can spiral sort of current activity to provide that sort of as a gap-bridger, if you will. I think on our C-5 program, I feel good about that because we have just gotten out of development for that contract. We have three fliers as we sit here today. They were part of that developmental program. The program actually went perfectly. I mean our flight test program finished early. It demonstrated the kinds of savings in terms of fuel cost, in terms of reliability that we had predicted on the program. And I still think there is a need for those aircrafts, those strategic airlift aircrafts going forward. So I feel pretty good about that program. I think the fact that we got that recently awarded is a good indication of that. You asked about the VH-71, kind of a similar situation I mean again as we sit here today, we are meeting every single key performance parameter on those Increment One aircraft. So, think about it in terms of weight, range, payload, those sorts of things. I mentioned in the prepared remarks that we have our first pilot production vehicle flying, so that program is doing well. I mean the ones – the program that I will be concerned are those that are new start programs, or those that are not performing well. And I don’t think either one of the programs you mentioned there C-5 or VH-71 are in either one of those categories. Ronald Epstein – Merrill Lynch: Great. Thanks a lot.

Thanks. Operator And we’ll go to Doug Harned, Sanford Bernstein. Doug Harned – Sanford Bernstein: Good morning.

Hi, Doug. Doug Harned – Sanford Bernstein: IS&GS, your – as you said, you are right on the edge of double digit revenue growth going into ’09 with you guidance. Could you talk about first have you seen a change in your outlook for IT expenditures from the federal government. And then second, if you look at the three different units there, Information Systems, Global Services, and Mission Solutions, how do you see those sort of relative to each other in terms of growth next year?

Yes. Good question and let me just reiterate, I don’t see a slowdown in IS&GS growth rate. I mean I appreciate what we are saying about the range that we provided in the guidance there, but our expectation is still – if I had Linda Gooden here I am sure she would echo the fact that she wants to achieve double digit growth year-over-year in her business area. Now having said that, if I look at the three pieces, and I would mention [ph] again, the three pieces that make up IS&GS is the Information Systems pieces, there is the Global Services piece, and there is the Mission Solutions piece. As we look at – those pieces are not growing consistently from ’08 into ’09. The faster growing piece is our Global Services piece. And that’ growing at a rate faster than double digit. The other two lines of business, if you will, the Information Systems and Mission Solutions, are growing slightly less than 10%, but they are growing consistent with each other. So, strong, higher single digit growth rates in both of those and strong double digit growth rates in the Global services piece of it. So, again, I don’t see any particular cause for concern there from my perspective. Doug Harned – Sanford Bernstein: And the elsewhere, when you look at foreign military sales, how are you looking at – I mean given the global economic environment, how are you looking at some of the upcoming awards you are hoping for thinks like UAS missile defense and then how firm do you feel that some of the ones you already have say some of the C-130 contracts are, given the outlook right now?

Okay. I will answer your second question first. I don’t see any of the international sales particularly the C-130 sales we have done here recently impacted by any of the current or most recent financial event. I think those are pretty solid as I sit here and look at today. You asked about the others, missile defense awards and so forth. I think our expectation is that those will track very nicely through our plan. And I don’t see those coming out either from the sequence or the schedule that we have laid on the table for when we expect those to happen. So I guess the short answer to both of those is we don’t see a huge push to the right on the international front as I just mentioned there. Doug Harned – Sanford Bernstein: So, no real change when you are talking with your foreign customers?

None, none whatsoever. Doug Harned – Sanford Bernstein: Okay, great. Thank you.

And we’ll go to Howard Rubel, Jefferies & Co.. Howard Rubel – Jefferies & Co.: Well, thank you very much. A follow-up on two things, one of Aeronautics, The P-3 mod, you had an issue with the P-3 mod contract.

Yes. Howard Rubel – Jefferies & Co.: Could you tell us how you have beat it to death so that there won't be more of this. The guys in Marietta [ph] were pretty bullish n the opportunities when we were down there not long ago.

Yes. Well maybe I will split, Howard, if I could, I will split it into two pieces. There is – this is a contract that we have had since 2005. This is really to do sort of heavy maintenance on the existing fleet of P-3 aircraft out in the field and those aircraft have experienced some pretty tough conditions, tough environments to operate in. They have been doing a lot of mission work over in Iraq and Afghanistan, and they were already subjected to kind of the sea, air phenomenon associated with salt there. So – again, we have had this contract since 2005. The contract runs out through 2010, it was a five-year contract. What we are seeing is as these aircrafts get what’s called inducted into the program they are in worse [ph] shape than we had expected and it was just taking us more time to modify and overhaul these aircraft than we expected. This provision that you talk about, that we took in the third quarter we believe takes us out through the full 2010, through the end of the contract, through the 2010 timeframe. So I think we are okay there. I will separate that from – I think what you saw down in Marietta [ph] on the investor tour, which is really the re-wing business and it’s a little bit of a separate business there. We are trying to re-wing aircraft, not do the sustainment or the modification of aircraft that are in the fleet and the overhaul of that. This is re-winging, putting, stripping out the old one, putting the brand new ones on if you will. That activity is still going very well for us. We are still seeing lots of interest, both domestically and internationally from both U.S. Navy as well as custom and border patrol aircraft. Norway, Canada, and some others as well they are having interest in there. So, I will make a distinction those two and say I think we have got the P-3 overhaul effort contained within the write-off [ph] we took in the third quarter and rest of the business is not part of that, if you will. Howard Rubel – Jefferies & Co.: And Bruce, wouldn’t you have a claim if the customer offered you an airplane that was different from the condition that you had agreed to at the time you had received it?

Yes. I will say, Howard, we have been having ongoing discussions with our customer about that very matter. And the provision we put in place right now assumes basically the same sort of contractual arrangement as we have today going forward, nothing better. We are in constant I guess discussions as we are literally today with the customer over the very subject that you raised in you question. Howard Rubel – Jefferies & Co.: And then 3.7 million shares I think is what you purchased in the quarter. That seems relatively low versus the run rate. Was there any event that prevented you from buying more in the period?

No, I mean nothing. Nothing extraordinary. I think if you look at the pattern we have done in the last couple of years, that’s tended to sort of be our pattern going forward. I don’t think it is anything kind of conscious. We – through the year-to-date third quarter we have had the highest ever share repurchase activity. I mean through the three quarter we have done more than we have in any single year previous to this. I think we have 98% of free cash flow to shareholders. So, I am not apologetic about that. I think we are doing fine there. Howard Rubel – Jefferies & Co.: I hear you loud and clear. Thank you.

Thank you, Howard. Operator And we will go to Myles Walton, Oppenheimer and Company. Myles Walton – Oppenheimer & Co.: Thanks, good morning.

Hi, Myles. Myles Walton – Oppenheimer & Co.: Could I ask you about Space for a second particularly in the launch services with respect to equity accounting and USA used to I think account for about $60 million of equity earnings through the P&L. Is that about where it still is and also as the shuttle winds down how quickly does that tail off?

Yes, I think your recollection is pretty accurate, Myles, and let’s go to the wind down. If Space kind of at the current level then at least through 2010, and then the question is will there be a shuttle extension or not and that’s the what if for beyond 2010, but think of it being similar levels to what you described through the 2010 timeframe. Myles Walton – Oppenheimer & Co.: Okay. And then likewise what is – is ULA two times that amount?

: Myles Walton – Oppenheimer & Co.: Okay. Last one, a clarification on the 25% assumption for the pension plan. Is that where it is currently? Is that just a placeholder? Is that – can you just give us maybe where it is currently?

Yes, that’s pretty close to where we are literally as I sit here and talk to you today. So, it’s not and if I was to pick a number that would be as good a number as I can pick to you today. Myles Walton – Oppenheimer & Co.: Okay thanks.

I should make one comment. I think I mis-spoke earlier to one of the questions about the commercial satellites and whereas I was talking to Space volume, I think I said there were no commercial sats in 2009 and there was one in 2008. The right answer there is we actually did have two commercial sats in 2008 and we are expecting to have one commercial sat in 2009. My apologies to the mis-speak there.

Teresa, this is Jerry. I think we have got time for one last one.

Thank you. We will go to Harry Nourse, Banc of America. Harry Nourse – Banc of America: Good morning.

Hi, Harry. Harry Nourse – Banc of America: You mentioned the LCS addition in 2009. Were there any other moving parts that went in or out of the appropriations bill?

No, I think we were – we did, we were happy to see – beyond what I talked about in terms of additional advance procurement money for the F-22 program, for instance, we did have the eight C-130s. I think you will see additional C-130s in the ’09 budget at higher levels than we saw in ’08. We saw the VH-71 Increment. We saw the LRIP 3 advanced funding for the F-35 program. So I think for most of the program that you watch closely I think they are well supported in the current budget outlook. Harry Nourse – Banc of America: Yes. Apologies if I said that earlier. I was late in joining.

Okay. Harry Nourse – Banc of America: And that’s all actually.

Okay. Well, thank you, Harry. Well, looking forward, we continue to focus our efforts on cost efficiency and performance on programs. Delivery of the best value to customers in the future budget environment will demand increasingly improved levels of performance. And our 140,000 employees have us uniquely positioned to deliver on this requirement and differentiate Lockheed Martin in the eyes of shareholders and customers. I would like to thank – I would like to close by thanking you for your questions and for joining the call today. We look forward to talking to you again in January when Bob Stevens will be joining us on the call. Bob will review our 2008 results and provide an update of our strategy, and 2009 financial outlook. Teresa, that concludes our call.

Ladies and gentlemen, that does conclude today’s conference. Thank you for your participation. You may disconnect at this time.