Lockheed Martin 2008 Annual Report Download - page 89

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Note 9 – Debt
Our long-term debt is primarily in the form of publicly issued notes and debentures, as follows:
(In millions) Interest Rate 2008 2007
Notes due 6/15/2008 7.70% $— $ 103
Notes due 12/1/2009 8.20% 241 241
Debentures due 4/15/2013 7.38% 150 150
Notes due 3/14/2013 4.12% 500 —
Debentures due 5/1/2016 7.65% 600 600
Debentures due 9/15/2023 7.00% 200 200
Notes due 6/15/2024 8.38% 167 167
Debentures due 6/15/2025 7.63% 150 150
Debentures due 5/1/2026 7.75% 423 423
Debentures due 12/1/2029 8.50% 317 317
Convertible Debentures due 8/15/2033 LIBOR – 0.25% —1,000
Debentures due 5/1/2036 7.20% 300 300
Notes due 9/1/2036 6.15% 1,079 1,079
Discount on Notes due 9/1/2036 N/A (340) (342)
Other Various 18 19
3,805 4,407
Less: Current maturities of long-term debt 242 104
$3,563 $4,303
In June 2008, our Board of Directors authorized and we announced the planned redemption of any and all of our $1.0
billion in original principal amount of floating rate convertible debentures that remained outstanding on August 15, 2008.
Holders could elect to convert their debentures at any time prior to the close of business on August 14, 2008. Any debentures
not delivered for conversion by the close of business on that date were no longer available for conversion and were redeemed
at $1,000 for each $1,000 in principal amount on August 15, 2008.
As of August 15, 2008, all of the debentures had been delivered for conversion or were redeemed. The aggregate
amount paid in cash subsequent to conversion of the debentures was $1.0 billion, representing the principal amount of the
debentures relative to our conversion obligations, which was equal to the original principal amount of the debentures. In
addition, the conversion rate for the debentures from the time of our announcement in June through August 15 was 13.7998
shares of common stock for each $1,000 in original principal amount of debentures, equating to a conversion price of $72.46.
The conversion obligations in excess of the principal amount, computed based on the closing price of our common stock over
the cash settlement averaging period as defined in the indenture, totaled $571 million, and resulted in the issuance of
5.0 million shares of our common stock. The issuance of the common shares for the conversion obligations was recognized
in stockholders’ equity as a $5 million increase to common stock and a corresponding net decrease to additional paid-in
capital. Also, a deferred tax liability of $63 million attributable to interest deductions associated with the debentures was
credited to additional paid-in capital upon conversion.
The debentures provided that if the price of our common stock exceeded 130% of the conversion price for a specified
period of time as defined in the indenture agreement, the holders could elect to convert their debentures in the following
calendar quarter. In the fourth quarter of 2007, the price of our common stock exceeded 130% of the $73.25 conversion price
for the specified period of time, and therefore holders of the debentures could elect to convert them during the quarter ending
March 31, 2008. The right to convert the debentures based on our stock price was re-evaluated each quarter. In addition, the
registered holders of $300 million of 40-year debentures issued in 1996 that bear interest of 7.20% could elect, between
March 1 and April 1, 2008, to have their debentures repaid on May 1, 2008. No such elections were made. We classified
those debentures and the $1.0 billion of convertible debentures as long-term based on our ability and intent to maintain the
debt outstanding for at least one year. Our ability to do so is demonstrated by our $1.5 billion revolving credit facility
discussed below.
In March 2008, we issued $500 million of long-term notes. The notes have a fixed coupon interest rate of 4.12% and are
due in 2013.
In August 2006, we issued $1,079 million of new 6.15% Notes due 2036 (the Notes) in exchange for a portion of our
then outstanding debt securities and cash consideration of $343 million. Holders also received a cash payment representing
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