Lockheed Martin 2008 Annual Report Download - page 99

waste and that we violated the False Claims Act by misleading Department of Energy officials and state regulators about the
nature and extent of environmental noncompliance at the plant. We dispute the allegations and are defending against them.
As described in the “Environmental Matters” discussion below, we are subject to federal and state requirements for
protection of the environment, including those for discharge of hazardous materials and remediation of contaminated sites.
As a result, we are a party to or have property subject to various other lawsuits or proceedings involving environmental
matters and remediation obligations.
On September 11, 2006, we and LMIMCo were named as defendants in a lawsuit filed in the U.S. District Court for the
Southern District of Illinois, seeking to represent a class of purportedly similarly situated participants and beneficiaries in our
Salaried Savings Plan and the Hourly Savings Plan (the Plans). Plaintiffs allege that we or LMIMCo caused the Plans to pay
expenses that were higher than reasonable by, among other actions, permitting service providers of the Plans to engage in
revenue sharing, paying investment management fees for the company stock funds, and causing the company stock funds to
hold cash for liquidity thus reducing the return on those funds. The plaintiffs further allege that we or LMIMCo failed to
disclose information appropriately relating to the fees associated with managing the Plans. In August 2008, plaintiffs filed an
amended complaint, adding allegations that we or LMIMCo breached fiduciary duties under ERISA with respect to particular
funds offered under our 401(k) plans. Plaintiffs have moved to certify a class in the matter, and we have opposed that
motion. We dispute the allegations and are defending against them.
We have been in litigation with certain residents of Redlands, California since 1997 before the California Superior
Court for San Bernardino County regarding allegations of personal injury, property damage, and other tort claims on behalf
of individuals arising from our alleged contribution to regional groundwater contamination. On July 11, 2006, the California
Court of Appeal dismissed the plaintiffs’ punitive damages claim. On September 23, 2008, the trial court dismissed the
remaining first tier plaintiffs, ending the first round of individual trials. The first tier plaintiffs are pursuing their appellate
remedies, and opposing counsel has asked the trial court to consider procedures for the litigation of the next round of
individual plaintiffs.
Environmental Matters
We are involved in environmental proceedings and potential proceedings relating to soil and groundwater
contamination, disposal of hazardous waste, and other environmental matters at several of our current or former facilities.
Environmental cleanup activities usually span several years, which make estimating liabilities a matter of judgment because
of such factors as changing remediation technologies, assessments of the extent of contamination, and continually evolving
regulatory environmental standards. We consider these and other factors in estimates of the timing and amount of any future
costs that may be required for remediation actions, which generally results in the calculation of a range of estimates for a
particular environmental site. We record a liability for the amount within the range which we determine to be our best
estimate of the cost of remediation or, in cases where no amount within the range is better than another, we record an amount
at the low end of the range. We do not discount the recorded liabilities, as the amount and timing of future cash payments are
not fixed or cannot be reliably determined.
At December 31, 2008 and 2007, the aggregate amount of liabilities recorded relative to environmental matters was
$809 million and $572 million. Approximately $694 million and $491 million are recorded in other liabilities on the Balance
Sheet, with the remainder recorded in other current liabilities. A portion of environmental costs is eligible for future recovery
in the pricing of our products and services on U.S. Government contracts. We have recorded assets totaling $683 million and
$480 million at December 31, 2008 and 2007 for the estimated future recovery of these costs, as we consider the recovery
probable based on government contracting regulations and our history of receiving reimbursement for such costs.
Approximately $585 million and $411 million are recorded in other assets on the Balance Sheet, with the remainder recorded
in other current assets.
We perform quarterly reviews of the status of our environmental sites and the related liabilities and assets. Based on the
reviews completed during the year, we increased the liability by $237 million and the asset deemed probable of recovery by
$203 million from the amounts recorded at December 31, 2007. We also recorded a charge for the year of $34 million, net of
state income tax benefits, for the portion of the increased liability that was not considered probable of future recovery. The
majority of the increase reflects the estimated long-term costs of new treatment systems and remediation activities at two
former operating facilities, in addition to increased estimated costs at other existing remediation sites.
We cannot reasonably determine the extent of our financial exposure in all cases at this time. There are a number of
former operating facilities which we are monitoring or investigating for potential future remediation. In some cases, although
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