• The Space Based Infrared System (SBIRS) spacecraft, launched in May, will protect our nation and allies from missile attack with vastly improved warning capabilities. 

• We delivered software to the Federal Aviation Administration to enable GPS technology in the New York area airspace, the nation’s second busiest. 

• Our Juno spacecraft was launched to Jupiter in August on a mission that will expand our knowledge of the solar system’s largest planet. A month later, our two GRAIL spacecraft were launched to the Moon in an effort to study the gravitational fi eld of Earth’s closest neighbor. 

These and other accomplishments are why Lockheed Martin has been acknowledged as an industry leader. In 2011, Aviation Week & Space Technology  named us the industry’s Top Performing Company for an unprecedented fourth consecutive year, saying that as far as program performance and cost are concerned, “Lockheed Martin is the one to beat.’’ 

Aviation Week’s  recognition speaks volumes about the 123,000 people of this company who support our customers, and also give so much to our communities. For the seventh consecutive year, in 2011, our employees volunteered more than one million hours of service to a wide variety of worthwhile causes. 

Additionally, we are dedicated to good stewardship of the environment. For example, the Carbon Disclosure Project, in its 2011 Global 500 Report, noted Lockheed Martin as leading the Aerospace and Defense industry in carbon footprint reduction. With our heightened awareness of cost and affordability, we’re working hard to limit waste and conserve energy because it’s smart business and it’s the right thing to do for the environment. 

The work many of our employees engage in 

to support our customers at times comes with great risk. In a tragic reminder of those risks, two of our colleagues were killed and two others injured during an April 2011 attack on a forward operating base in Afghanistan. They were on a team providing vitally important surveillance information to U.S. military and coalition forces, and they were dedicated to the program, the mission, and the fight for freedom. Their sacrifice reminds us of the important work we do every day supporting deployed forces in the defense of liberty. 

## Looking to the Future: Staying Aligned With Our Customers 

As a leading global security and aerospace company, we must maintain a consistent tempo of performance to sustain our momentum into 2012 and beyond. This is especially critical given the developments we see on the horizon. We continue to operate in a tough economy, which includes a reduction in the Department of Defense budget by at least $487 billion over the next decade. We also see shifting priorities under Secretary Panetta’s new Strategic Guidance that put greater attention on the Asia-Pacific region and continued focus on the Middle East. 

Our broad portfolio of strong programs gives us the resilience to weather this budget volatility and it matches extremely well with the strategic priorities of our customers under the new Defense Department Guidance. Increasingly, our customers will require the capabilities we’re best equipped to deliver, such as air and naval power, missile defense, 5th Generation tactical aircraft, space systems, cyber security, and support for Special Operations Forces. 

We are concerned, however, that we still face the possibility of U.S. budget sequestration in January 2013. Sequestration would result in an additional $1.2 trillion in automatic across-the- board cuts evenly divided between defense and non-defense spending over 10 years. Coupled 

