Lockheed Martin 2011 Annual Report Download - page 76

Note 9 – Debt
Our long-term debt consisted of the following:
(In millions) 2011 2010
Notes with rates from 2.13% to 6.15%, due 2016 to 2041 $5,308 $3,807
Notes with rates from 7.00% to 7.75%, due 2013 to 2036 1,239 1,323
Other 419 394
Unamortized discounts (506) (505)
Total long-term debt $6,460 $5,019
On September 9, 2011, we issued $2.0 billion of long-term notes in a registered public offering consisting of
$500 million due in 2016 with a fixed coupon interest rate of 2.13%, $900 million due in 2021 with a fixed coupon interest
rate of 3.35%, and $600 million due in 2041 with a fixed coupon interest rate of 4.85%. We may, at our option, redeem some
or all of the notes at any time by paying a make-whole premium, plus accrued and unpaid interest, if any, to the date of
redemption. Interest on the notes is payable on March 15 and September 15 of each year, beginning on March 15, 2012. In
October 2011, we used a portion of the proceeds to redeem all of our $500 million long-term notes due in 2013. In 2011, we
repurchased $84 million of our long-term notes through open-market purchases. We paid premiums of $48 million in
connection with the early extinguishments of debt, which were recognized in other non-operating income, net.
In May 2010, we issued $728 million of new 5.72% Notes due 2040 (the New Notes) in exchange for $611 million of
our then outstanding debt securities (the Old Notes). We paid a premium of $158 million in the exchange, of which
$117 million was in the form of the New Notes and $41 million was paid in cash, which was recorded as a discount and will
be amortized as additional interest expense over the life of the New Notes, using the effective interest method.
In August 2011, we entered into a new $1.5 billion revolving credit facility with a group of banks and terminated our
existing $1.5 billion revolving credit facility which was to expire in June 2012. The new credit facility expires August 2016,
and we may request and the banks may grant, at their discretion, an increase to the new credit facility by an additional
amount up to $500 million. There were no borrowings outstanding under either facility through December 31, 2011.
Borrowings under the new credit facility would be unsecured and bear interest at rates based, at our option, on a Eurodollar
rate or a Base Rate, as defined in the new credit facility. Each bank’s obligation to make loans under the new credit facility is
subject to, among other things, our compliance with various representations, warranties and covenants, including covenants
limiting our ability and certain of our subsidiaries’ ability to encumber assets and a covenant not to exceed a maximum
leverage ratio, as defined in the new credit facility. As of December 31, 2011, we were in compliance with all covenants
contained in the new credit facility, as well as in our debt agreements.
We have agreements in place with banking institutions to provide for the issuance of commercial paper. There were no
commercial paper borrowings outstanding during 2011 or 2010. If we were to issue commercial paper, the borrowings would
be supported by the new credit facility.
During the five-year period from 2012 through 2016, we have $153 million and $954 million in scheduled long-term
debt maturities, which are due in 2013 and 2016. Interest payments were $326 million in 2011, $337 million in 2010, and
$286 million in 2009.
Note 10 – Postretirement Plans
Defined Benefit Pension Plans and Retiree Medical and Life Insurance Plans
Most of our employees hired on or before December 31, 2005 are covered by qualified defined benefit pension plans,
and we provide certain health care and life insurance benefits to eligible retirees (collectively, postretirement benefit plans).
We also sponsor nonqualified defined benefit pension plans to provide for benefits in excess of qualified plan limits.
Non-union represented employees hired on or after January 1, 2006 do not participate in our qualified defined benefit
pension plans, but are eligible to participate in a qualified defined contribution plan in addition to our other retirement
savings plans. They also have the ability to participate in our retiree medical plans, but we do not subsidize the cost of their
participation in those plans as we do with employees hired before January 1, 2006. We have made contributions to trusts
established to pay future benefits to eligible retirees and dependents (including Voluntary Employees’ Beneficiary
Association trusts and 401(h) accounts, the assets of which will be used to pay expenses of certain retiree medical plans). We
use December 31 as the measurement date. Benefit obligations as of the end of each year reflect assumptions in effect as of
those dates. Net periodic benefit cost is based on assumptions in effect at the end of the respective preceding year.
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