Lockheed Martin 2002 Annual Report Download - page 41

FORTY-EIGHT
Lockheed Martin Corporation
MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
December 31, 2002
and severally liable and, therefore, we are potentially liable for
the full cost of funding such remediation. In the unlikely event
that we were required to fund the entire cost of such remedia-
tion, the statutory framework provides that we may pursue
rights of contribution from the other PRPs.
In addition to the amounts related to the Redlands,
Burbank, Glendale and Great Neck sites described above, a
liability of approximately $130 million for the other properties
(including current operating facilities and certain facilities
operated in prior years) in which an estimate of financial expo-
sure can be determined has been recorded. We believe that it is
unlikely that any additional liability we may have for known
environmental issues would have a material adverse effect on
our consolidated results of operations or financial position.
As described in Note 15 to the financial statements, we
are continuing to pursue recovery of a significant portion of
the unanticipated costs we incurred for a $180 million fixed-
price contract with the U.S. Department of Energy (DoE) for
the remediation of waste found in Pit 9. We have been unsuc-
cessful to date in reaching agreement with the DoE on cost
recovery or other contract restructuring matters. In 1998, the
management contractor for the project, a wholly-owned sub-
sidiary of ours, at the DoE’s direction, terminated the Pit 9
contract for default. We sued the DoE in the U.S. Court of
Federal Claims seeking to overturn the default termination and
to recover our costs. The management contractor, at the DoE’s
direction, sued us in the U.S. District Court in Idaho seeking,
among other things, recovery of about $54 million previously
paid to us under the contract. We filed counterclaims, again seek-
ing to overturn the default termination and recover our costs. In
2001, the Court of Federal Claims dismissed our lawsuit against
the DoE, finding that we lacked privity of contract with the
DoE. On September 30, 2002, the U.S. Court of Appeals for
the Federal Circuit affirmed the dismissal. We did not appeal
the decision further and will continue to seek resolution of the
Pit 9 dispute through non-litigation means while pursuing our
remedies in the Idaho proceeding, which is set for trial in
August 2003.
CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in
our periodic filings with the SEC is recorded, processed, sum-
marized and reported within the time periods specified in the
SEC’s rules and forms, and that such information is accumu-
lated and communicated to our management, including our
Chief Executive Officer (CEO) and Chief Financial Officer
(CFO), as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating the disclosure
controls and procedures, management recognized that any
controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving
the desired control objectives, and management necessarily
was required to use its judgment in evaluating the cost to
benefit relationship of possible controls and procedures. Also,
we have investments in certain unconsolidated entities. As we
do not control or manage these entities, our disclosure controls
and procedures with respect to those entities are necessarily
substantially more limited than those we maintain with respect
to our consolidated subsidiaries.
Within 90 days prior to the date of this report, we per-
formed an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures. The eval-
uation was performed with the participation of senior manage-
ment of each business segment and key Corporate functions,
and under the supervision of the CEO and CFO. Based on the
evaluation, our management, including the CEO and CFO,
concluded that our disclosure controls and procedures were
effective. There have been no significant changes in our inter-
nal controls or in other factors that could significantly affect
internal controls after the date we completed the evaluation.