Lockheed Martin 2008 Annual Report Download - page 81

Note 3 – Other Income (Expense), Net
The components of other income (expense), net included the following:
(In millions) 2008 2007 2006
Included in operating profit
Equity in net earnings of equity investees $289 $203 $130
Gain on sale of ownership interests in LKEI and ILS 108 ——
Earnings from elimination of reserves associated with various land sales 85 ——
Gain on sale of Comsat International —25 —
Gain on sales of land —25 51
Earnings from reversal of legal reserves due to settlement —21 —
Gains on sales of various investment interests —— 127
Earnings from expiration of AES transaction indemnification ——29
Gain on sale of Space Imaging’s assets ——23
Other activities, net —19 (24)
$482 $293 $336
Included in other non-operating income (expense), net
Investment income (expense), net $ (88) $193 $199
Debt-related expenses and charges —— (16)
$ (88) $193 $183
See Notes 9 and 14 for a discussion of certain transactions included in the table above.
Note 4 – Information on Business Segments
We operate in four principal business segments: Electronic Systems, Information Systems & Global Services,
Aeronautics, and Space Systems. We organize our business segments based on the nature of the products and services
offered. In the following tables of financial data, the total of the operating results of these business segments is reconciled, as
appropriate, to the corresponding consolidated amount. With respect to the caption “Operating profit,” the reconciling item
“Unallocated Corporate income (expense), net” includes the FAS/CAS pension adjustment (see discussion below), costs for
certain stock-based compensation programs (including stock-based compensation costs for stock options and restricted stock
as discussed in Note 12), the effects of items not considered part of management’s evaluation of segment operating
performance, Corporate costs not allocated to the operating segments and other miscellaneous Corporate activities. Since the
activities of the investees in which certain business segments hold equity interests are closely aligned with the operations of
those segments, the equity earnings (losses) from those investees are included in the operating profit of the respective
segments. For financial data other than operating profit where amounts are reconciled to consolidated totals, all activities
other than those pertaining to the principal business segments are included in “Corporate activities.”
The FAS/CAS pension adjustment represents the difference between pension expense or income calculated for financial
reporting purposes under GAAP in accordance with FAS 87, Employers’ Accounting for Pensions, and pension costs
calculated and funded in accordance with U.S. Government Cost Accounting Standards (CAS), which are reflected in our
business segment results. CAS is a major factor in determining our pension funding requirements, and governs the extent of
allocability and recoverability of pension costs on government contracts. The CAS expense is recovered through the pricing
of our products and services on U.S. Government contracts, and therefore recognized in segment net sales. The results of
operations of our segments only include pension expense as determined and funded in accordance with CAS rules.
Transactions between segments are generally negotiated and accounted for under terms and conditions similar to other
government and commercial contracts; however, these intercompany transactions are eliminated in consolidation and for
purposes of the presentation of net sales in the related table that follows. Other accounting policies of the business segments
are the same as those described in Note 1.
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