Lockheed Martin 2004 Annual Report Download - page 48

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NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES
Organization — Lockheed Martin Corporation (Lockheed
Martin or the Corporation) principally researches, designs, devel-
ops, manufactures, integrates, operates and sustains advanced
technology systems, products and services. As a leading systems
integrator, its products and services range from aircraft, space-
craft and launch vehicles to missiles, electronics and informa-
tion systems. The Corporation mainly serves customers in
domestic and international defense, civil markets and home-
land security, with its principal customers being agencies of the
U.S. Government.
Basis of consolidation and classifications — The consolidated
financial statements include the accounts of wholly-owned sub-
sidiaries and majority-owned entities which the Corporation
controls. Intercompany balances and transactions have been
eliminated in consolidation. Receivables and inventories are
primarily attributable to long-term contracts or programs in
progress for which the related operating cycles are longer than
one year. In accordance with industry practice, these items are
included in current assets.
Certain amounts for prior years have been reclassified to
conform with the 2004 presentation.
Use of estimates — The preparation of consolidated financial
statements in conformity with accounting principles generally
accepted in the United States (GAAP) requires management to
make estimates and assumptions, including estimates of antici-
pated contract costs and revenues utilized in the earnings recog-
nition process, that affect the reported amounts in the financial
statements and accompanying notes. Due to the size and nature
of many of the Corporation’s programs, the estimation of total
revenues and cost at completion is subject to a wide range of
variables, including assumptions for schedule and technical
issues. Actual results may differ from those estimates.
Cash and cash equivalents — Cash equivalents are generally
composed of highly liquid instruments with original maturities
of 90 days or less. Due to the short maturity of these instru-
ments, carrying value on the Corporation’s consolidated bal-
ance sheet approximates fair value.
Short-term investments — The Corporation’s short-term invest-
ments consist of marketable securities that are categorized as
available-for-sale securities as defined by Statement of
Financial Accounting Standards (FAS) 115, Accounting for
Certain Investments in Debt and Equity Securities. Realized
gains and losses are recorded in the statement of earnings under
the caption other income and expenses. For purposes of com-
puting realized gains and losses, cost is determined on a spe-
cific identification basis. The fair values of marketable
securities are estimated based on quoted market prices for the
respective securities.
The Corporation records short-term investments at fair
value. At year-end, the investment portfolio was composed of
the following:
(In millions) 2004 2003
Amortized Fair Amortized Fair
Cost Value Cost Value
U.S. treasury and
government agency
securities $252 $251 $125 $126
Corporate debt securities 117 117 94 94
Mortgage-backed and
other securities 28 28 20 20
$397 $396 $239 $240
Approximately 77% of the securities had contractual matu-
rities of one year or less. An additional 22% of the securities
had contractual maturities of one to five years. Marketable
securities sales proceeds totaled $384 million in 2004 and $116
million in 2003. Gross gains and losses related to sales of mar-
ketable securities for both years, as well as net unrealized gains
and losses at each year-end, were not material.
Lockheed Martin Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2004