Lockheed Martin 2003 Annual Report Download - page 62

Lockheed Martin Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003
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Certain plans for hourly employees include a non-leveraged
ESOP. In one such plan, the match is made, generally at the
election of the participant, in either the Corporation’s common
stock or a different investment choice. The Corporation’s con-
tributions to these plans were made through cash contributed to
the ESOP trust which was used, if so elected, to purchase com-
mon stock from terminating participants or in the open market
for allocation to participant accounts. This ESOP trust held
approximately 3.3 million issued and outstanding shares of
common stock at December 31, 2003.
Defined benefit pension plans, and retiree medical and life
insurance plans — Most employees are covered by defined ben-
efit pension plans, and certain health care and life insurance
benefits are provided to eligible retirees by the Corporation.
The Corporation has made contributions to trusts (including
Voluntary Employees’ Beneficiary Association trusts and
401(h) accounts, the assets of which will be used to pay expens-
es of certain retiree medical plans) established to pay future
benefits to eligible retirees and dependents. The Corporation
uses December 31 as its measurement date. Benefit obligations
as of the end of each year reflect assumptions in effect as of
those dates. Net pension and net retiree medical costs for each
of the years presented were based on assumptions in effect at
the end of the respective preceding years.
The following provides a reconciliation of benefit obliga-
tions, plan assets and funded status of the plans:
Defined Retiree Medical
Benefit and Life
Pension Plans Insurance Plans
(In millions) 2003 2002 2003 2002
CHANGE IN BENEFIT
OBLIGATIONS
Benefit obligations at
beginning of year $21,918 $19,713 $3,316 $3,125
Service cost 640 565 40 37
Interest cost 1,453 1,401 211 213
Benefits paid (1,296) (1,247) (344) (320)
Actuarial losses 1,603 1,417 424 190
Amendments 46 102 80 13
Divestitures —(33) 3(6)
Participants’ contributions ——80 64
Benefit obligations at
end of year $24,364 $21,918 $3,810 $3,316
Defined Retiree Medical
Benefit and Life
Pension Plans Insurance Plans
(In millions) 2003 2002 2003 2002
CHANGE IN PLAN ASSETS
Fair value of plan assets
at beginning of year $17,661 $ 20,300 $ 906 $ 1,026
Actual return on plan assets 3,876 (1,397) 216 (125)
Benefits paid (1,296) (1,247) (343) (318)
Corporation’s contributions 669 69 276 259
Participants’ contributions ——80 64
Divestitures 3(64) ——
Fair value of plan assets
at end of year $20,913 $17,661 $ 1,135 $ 906
Unfunded status of the plans $(3,451) $(4,257) $(2,675) $(2,410)
Unrecognized net
actuarial losses 5,486 6,075 1,122 891
Unrecognized prior
service cost 534 568 113 39
Unrecognized transition
asset (1) (3) ——
Net amount recognized $ 2,568 $ 2,383 $(1,440) $(1,480)
AMOUNTS RECOGNIZED
IN THE CONSOLIDATED
BALANCE SHEET:
Prepaid assets $ 1,213 $ 1,221 $—$—
Accrued liabilities (1,100) (1,872) (1,440) (1,480)
Intangible asset 517 551 ——
Accumulated other
comprehensive loss
related to minimum
pension liability 1,938 2,483 ——
Net amount recognized $ 2,568 $ 2,383 $(1,440) $(1,480)
The projected benefit obligations (PBO) for the
Corporation’s more significant defined benefit pension plans
exceeded the fair value of the plans’ assets at December 31,
2003 and 2002, as reflected in the table above.
At December 31, 2003 and 2002, the Corporation’s con-
solidated balance sheet included pretax additional minimum
pension liabilities of $1.9 billion and $2.5 billion, respectively,
related to certain of its defined benefit pension plans. This lia-
bility is calculated on a plan-by-plan basis, and is required if the
accumulated benefit obligation (ABO) of the plan exceeds the
fair value of the plan assets and the plan’s accrued pension lia-