Lockheed Martin 2004 Annual Report Download - page 64

Lockheed Martin Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2004
62
The Corporation generally refers to U.S. Government Cost
Accounting Standards (CAS) and Internal Revenue Code rules
in determining funding requirements for its pension plans. In
September and December 2004, the Corporation made discre-
tionary prepayments totaling $485 million to the defined bene-
fit plan pension trust, which will reduce its cash funding
requirements for 2005. In December 2004, the Corporation also
made a discretionary prepayment of $133 million to its retiree
medical and life insurance plans. In 2005, the Corporation
expects to contribute $70 million - $80 million to its defined
benefit pension plans and $190 million - $200 million to its
retiree medical and life insurance plans, after giving considera-
tion to the 2004 prepayments.
The following benefit payments, which reflect expected
future service, as appropriate, are expected to be paid:
(In millions) Pension Benefits Other Benefits
2005 $1,366 $ 274
2006 1,403 262
2007 1,446 269
2008 1,493 272
2009 1,546 276
Years 2010 –2014 8,716 1,403
The Corporation sponsors nonqualified defined benefit
plans to provide benefits in excess of qualified plan limits. The
expense associated with these plans totaled $61 million in
2004, $60 million in 2003 and $54 million in 2002.
NOTE 13 — LEASES
Total rental expense under operating leases was $318 million,
$301 million and $235 million for 2004, 2003 and 2002,
respectively.
Future minimum lease commitments at December 31, 2004
for all operating leases that have a remaining term of more than
one year were approximately $1.1 billion ($251 million in 2005,
$184 million in 2006, $149 million in 2007, $116 million in
2008, $85 million in 2009 and $281 million in later years).
Certain major plant facilities and equipment are furnished by the
U.S. Government under short-term or cancelable arrangements.
NOTE 14 — LEGAL PROCEEDINGS, COMMITMENTS
AND CONTINGENCIES
The Corporation or its subsidiaries are parties to or have prop-
erty subject to litigation and other proceedings, including mat-
ters arising under provisions relating to the protection of the
environment. The results of legal proceedings cannot be pre-
dicted with certainty. In the opinion of management and in-
house counsel, the probability is remote that the outcome of
these matters will have a material adverse effect on the
Corporation’s consolidated results of operations, financial posi-
tion or cash flows. These matters include the following items,
all of which have been previously reported:
A class action complaint alleging violations of the securi-
ties laws filed against the Corporation and certain of its officers
and directors in the United States District Court for the Central
District of California, In re Lockheed Martin Corp. Securities
Litigation, was dismissed on March 26, 2003. On February 23,
2005, the U.S. Court of Appeals for the Ninth Circuit affirmed
the District Court’s order dismissing the case. The plaintiffs may
seek an en banc review by the Ninth Circuit or file a petition for
a writ of certiorari with the United States Supreme Court.
The Corporation was named as a defendant in a lawsuit
filed in the United States District Court for the District of Idaho
by Lockheed Martin Idaho Technologies Company, as the
Department of Energy (DoE) management contractor at the
Idaho National Engineering and Environmental Laboratory, in
connection with the termination of a contract for the environ-
mental remediation of Pit 9 at the site. On October 29, 2004, the
court rendered a decision upholding the termination for default
and rejecting the Corporation’s counterclaims. The court con-
cluded that the Corporation must repay $54 million in progress
payments made under the contract, plus interest and legal fees,
and pay approximately $12 million in decontamination and
decommissioning costs. As a result of the court’s decision, the
Corporation recorded an after-tax charge in the fourth quarter
of 2004 of $117 million ($0.26 per share) for damages attribut-
able to the decision and to write off the costs that it had previ-
ously assumed were recoverable.
On June 17, 2002, the Corporation was served with a grand
jury subpoena issued by the United States District Court for the
Central District of California. The subpoena sought documents
relating to an international sales agent engaged by Loral
Corporation in connection with the sale of synthetic aperture
radars to the Government of Korea in 1996. The Corporation is
cooperating with the investigation.