Lockheed Martin 2011 Annual Report Download - page 89

impairment charge, which was determined using a Level 3 valuation that was based on inputs and analysis used to estimate
the expected net proceeds from the sale transaction, reduced the carrying value of PAE to equal the expected net proceeds
from the transaction. These amounts are included in “Other adjustments” in the table below, which also includes other
charges associated with Savi and the sale of PAE that were incurred in 2011.
In November 2010, we closed on the sale of EIG, a business within our IS&GS business segment, for $815 million and
recognized a gain, net of tax, of $184 million ($.50 per share) in 2010, which is included in discontinued operations. We
received proceeds, net of $17 million in transaction costs, of $798 million related to the sale, which are included in investing
activities on our 2010 Statement of Cash Flows. We made a $260 million tax payment related to the sale which is included in
operating activities on our 2010 Statement of Cash Flows. EIG’s operating results are included in discontinued operations on
our Statements of Earnings for 2009 and 2010 through the date of sale. Additional amounts related to the completion of
certain post-closing items, such as working capital adjustments, may be recorded in discontinued operations in periods
subsequent to the sale date.
In the following table, we have combined the results of operations of PAE, EIG, and Savi, as the amounts for the
individual businesses are not material. Summary financial information related to discontinued operations is as follows:
(In millions) 2011 2010 2009
Net sales $193 $1,177 $1,279
Earnings (loss) before income taxes (40) 17 24
Earnings (loss) after income taxes (28) 76
Gain on sale of EIG, after income taxes —184 —
Other adjustments 16 73 —
Net earnings (loss) from discontinued operations $ (12) $ 264 $ 6
The major classes of assets and liabilities related to PAE and classified as held for sale on our December 31, 2010
Balance Sheet consisted of the following: receivables, net of $253 million, goodwill and other assets of $143 million,
accounts payable and accrued expenses of $125 million, and other liabilities of $79 million.
Note 15 – Fair Value Measurements
Our assets and liabilities that are measured and recorded at fair value on our Balance Sheets on a recurring basis consist
of our short-term investments, investments held in a Rabbi Trust (Note 1), and derivative assets and liabilities. The following
table presents these assets and liabilities and their level within the fair value hierarchy:
December 31, 2011 December 31, 2010
(In millions) Total Level 1 Level 2 Total Level 1 Level 2
Assets
Equity securities (a) $ 91 $ 91 $— $ 86 $ 86 $—
Mutual funds (a) 380 380 — 450 450 —
U.S. Government securities (b) 211 — 211 719 — 719
Other securities (b) 102 — 102 104 — 104
Derivative assets (c) 43 — 43 26 — 26
Liabilities
Derivative liabilities (c) 26 — 26 33 — 33
(a) Equity securities and interests in mutual funds are valued using quoted market prices.
(b) U.S. Government securities and other securities, which consist primarily of corporate debt securities, U.S. Government-sponsored
enterprise securities, and mortgage-backed securities, are valued based on inputs other than quoted prices that are observable for the
asset (e.g., interest rates and yield curves observable at commonly quoted intervals).
(c) Derivative assets and liabilities relate to foreign currency exchange and interest rate swap contracts and are valued based on
observable market prices (e.g., interest rates and yield curves observable at commonly quoted intervals), but are not exchanged in an
active market.
Our cash equivalents include highly liquid instruments with original maturities of 90 days or less. Due to the short
maturity of these instruments, the carrying amount on our Balance Sheets approximates fair value. Our accounts receivable
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