Lockheed Martin 2002 Annual Report Download - page 38

FORTY-FIVE
We actively seek to finance our business in a manner that
preserves financial flexibility while minimizing borrowing
costs to the extent practicable. Our management continually
reviews changes in financial, market and economic conditions
to manage the types, amounts and maturities of our indebted-
ness. Periodically, we may refinance existing indebtedness,
vary our mix of variable-rate and fixed-rate debt, or seek alter-
native financing sources for our cash and operational needs.
Cash and cash equivalents (including temporary invest-
ments), internally generated cash flow from operations and
other available financing resources, including those described
above, are expected to be sufficient to meet anticipated operat-
ing, capital expenditure and debt service requirements, as well
as discretionary investment needs, during the next twelve
months. Consistent with our desire to generate cash to reduce
debt and invest in our core businesses, we expect that, subject
to prevailing financial, market and economic conditions, we
will continue to explore the sale of non-core businesses, pas-
sive equity investments and surplus real estate.
At December 31, 2002, we had contractual commitments
to repay debt (including capital lease obligations), and to make
payments under operating leases. Generally, our long-term
debt obligations are subject to, along with other things, com-
pliance with certain covenants, including covenants limiting
our ability and the ability of certain of our subsidiaries to
encumber our assets. Payments due under these long-term
obligations are as follows:
Payments Due by Period
Less
than 1–3 4–5 After
(In millions) Total 1 Year Years Years 5 Years
Long-term debt
and capital
lease obligations(a) $7,557 $1,365 $156 $ 816 $5,220
Operating lease
commitments(b) 1,042 222 356 236 228
Total contractual
cash obligations $8,599 $1,587 $512 $1,052 $5,448
(a) Amounts exclude a $25 million adjustment to the fair value of
long-term debt relating to the Corporation’s interest rate swap
agreements which will not be settled in cash.
(b) Includes future payments related to a leasing arrangement with a
state government authority for Atlas V launch facilities. Total
payments under the arrangement are expected to be approxi-
mately $320 million over a 10-year period. Lease payments
began in August 2002.
We have entered into standby letter of credit agreements
and other arrangements with financial institutions and cus-
tomers mainly relating to the guarantee of future performance
on some of our contracts to provide products and services to
customers. At December 31, 2002, we had contingent liabili-
ties on outstanding letters of credit, guarantees and other
arrangements, as follows:
Commitment Expiration per Period
Total Less
Commit- than 1–3 4–5 After
(In millions) ment 1 Year Years Years 5 Years
Surety bonds(a) $291 $117 $ 74 $100 $—
Standby letters
of credit(a) 288 200 73 4 11
Guarantees 3 2 1 — —
Total commitments $582 $319 $148 $104 $11
(a) Approximately $100 million and $5 million of surety bonds in the
“less than 1 year” and “1–3 year” periods, respectively, and
approximately $143 million and $4 million of standby letters of
credit in the “less than 1 year” and “1–3 year” periods, respec-
tively, are expected to automatically renew for additional one-to-
two year periods until completion of the contractual obligation.
We have issued standby letters of credit and surety bonds
totaling $4.1 billion related to advances received from cus-
tomers and/or to secure our performance under long-term con-
tracts. Amounts included in the table above totaling $579
million are those amounts over and above advances received
from customers which are recorded in the balance sheet as
either offsets against inventories or in customer advances and
amounts in excess of costs incurred. Of the $3.5 billion
recorded in the balance sheet, approximately $2 billion relates
to a standby letter of credit to secure advance payments
received under an F-16 contract from an international cus-
tomer. This letter of credit is available for draw down only in
the event of our nonperformance. Similar to the letter of credit
for the F-16 contract, letters of credit and surety bonds for
other contracts are available for draw down only in the event
of our nonperformance.
We hold a 46% interest in a joint venture called Space
Imaging, LLC (Space Imaging) which we account for under the
equity method. Space Imaging was recently successful in obtain-
ing certain long-term commitments from the U.S. Government for
purchases of commercial satellite imagery on an as needed basis.
However, to execute its current business plans and fund future
replacement satellites, Space Imaging will likely need, but has
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