Lockheed Martin 2003 Annual Report Download - page 37

Our stockholders’ equity amounted to $6.8 billion at
December 31, 2003, an increase of about $900 million from
December 31, 2002. Net earnings, stock plan activities and a
reduction of our minimum pension liability, more than offset
our payment of dividends and share repurchase activities.
The $1.0 billion in floating rate convertible debentures we
issued in 2003 are due in 2033. They bear interest at a rate equal
to three-month LIBOR less 25 basis points, reset quarterly.
Accordingly, to the extent three-month LIBOR increases or
decreases by 1%, our interest expense would increase or
decrease by $10 million on a pretax basis. Interest on the deben-
tures is payable quarterly through August 15, 2008, after which
the interest will accrue as part of the value of the debenture and
will be payable, along with the principal amount, at maturity.
The debentures are convertible by their holders into our com-
mon stock in certain limited circumstances as outlined in the
indenture agreement. Upon conversion, we have the right to
deliver, in lieu of common stock, cash or a combination of cash
and common stock. We have the right to redeem any or all of
the debentures at any time after August 15, 2008.
In 2003, we repaid a total of $2.2 billion of long-term debt,
including scheduled and early debt repayments, and the repay-
ment of $130 million related to our guarantee of Space
Imaging, LLC’s borrowings under its credit facility. We repaid
several issuances of our long-term debt early through the com-
pletion of tender offers, redemption of certain callable debt
securities and open market purchases of other outstanding debt
issuances. Through these activities, we repaid debt totaling
$1.4 billion with interest rates ranging from 7.25% to 8.375%
and maturities ranging from 2006 to 2026. In connection with
the early repayments, we recorded losses in 2003, net of state
income tax benefits, totaling $146 million. The losses reduced
net earnings by $96 million ($0.21 per diluted share).
At the end of 2003, we had in place a $1.5 billion revolving
credit facility under which no borrowings were outstanding.
This credit facility will expire in November 2006. Borrowings
under the credit facility would be unsecured and bear interest at
rates based, at our option, on the Eurodollar rate or a bank Base
Rate (as defined). Each bank’s obligation to make loans under
the credit facility is subject to, among other things, our compli-
ance with various representations, warranties and covenants,
including covenants limiting our ability and the ability of cer-
tain of our subsidiaries to encumber our assets, and a covenant
not to exceed a maximum leverage ratio.
We have agreements in place with banking institutions to
provide for the issuance of commercial paper. There were no
commercial paper borrowings outstanding at December 31,
2003. If we were to issue commercial paper, the borrowings
would be supported by the $1.5 billion credit facility.
We have an effective shelf registration statement on file
with the Securities and Exchange Commission to provide for
the issuance of up to $1 billion in debt securities. If we were to
issue debt under this shelf registration, we would expect to use
the net proceeds for general corporate purposes. These pur-
poses may include repayment of debt, working capital needs,
capital expenditures, acquisitions and any other general corpo-
rate purpose.
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. We may at times refinance existing indebtedness, vary our
mix of variable-rate and fixed-rate debt, or seek alternative
financing sources for our cash and operational needs.
At December 31, 2003, we had contractual commitments
to repay debt (including capital lease obligations), make pay-
ments under operating leases, settle obligations related to
agreements to purchase goods and services, and settle other
long-term liabilities. Payments due under these long-term obli-
gations and commitments 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 $ 6,208 $ 136 $ 253 $ 725 $5,094
Operating lease
commitments 1,135 254 349 219 313
Purchase obligations 1,660 827 553 207 73
Other long-term
liabilities 1,051 120 202 145 584
Total contractual
cash obligations $10,054 $1,337 $1,357 $1,296 $6,064
Generally, our long-term debt obligations are subject to,
along with other things, compliance with certain covenants,
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