Lockheed Martin 2003 Annual Report Download - page 65

Lockheed Martin Corporation
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The Corporation sponsors nonqualified defined benefit
plans to provide benefits in excess of qualified plan limits. The
expense associated with these plans totaled $60 million in
2003, $54 million in 2002 and $47 million in 2001.
NOTE 14 — LEASES
Total rental expense under operating leases was $301 million,
$235 million and $223 million for 2003, 2002 and 2001,
respectively.
Future minimum lease commitments at December 31, 2003
for all operating leases that have a remaining term of more than
1 year were approximately $1.1 billion ($254 million in 2004,
$194 million in 2005, $155 million in 2006, $120 million in
2007, $99 million in 2008 and $313 million in later years).
Certain major plant facilities and equipment are furnished by the
U.S. Government under short-term or cancelable arrangements.
NOTE 15 — COMMITMENTS AND
CONTINGENCIES
The Corporation or its subsidiaries are parties to or have prop-
erty subject to litigation and other proceedings, including mat-
ters arising under provisions relating to the protection of the
environment. In the opinion of management and in-house coun-
sel, the probability is remote that the outcome of these matters
will have a material adverse effect on the Corporation’s consol-
idated results of operations, financial position or cash flows.
These matters include the following items:
Environmental matters — The Corporation is responding to
three administrative orders issued in 1994 and 1997 by the
California Regional Water Quality Control Board (the Regional
Board) in connection with the Corporation’s former Lockheed
Propulsion Company facilities in Redlands, California. Under
the orders, the Corporation is investigating the impact and
potential remediation of regional groundwater contamination
by perchlorates and chlorinated solvents. The Regional Board
has approved the Corporation’s plan to maintain public water
supplies with respect to chlorinated solvents during this inves-
tigation, and the Corporation continues to negotiate with local
water purveyors to implement this plan, as well as to address
water supply concerns relative to perchlorate contamination. In
January 2002, the State of California reduced its provisional
standard for perchlorate concentration in water from 18 parts
per billion (ppb) to 4 ppb, a move that industry believes is not
supported by the current studies.
Although this provisional standard does not create any
legally enforceable requirements for the Corporation at this
time, the Corporation developed and is in the process of imple-
menting a preliminary remediation plan that would meet the
provisional standard if it were to become final. The consolidat-
ed balance sheet at December 31, 2003 includes a liability of
approximately $180 million representing the Corporation’s esti-
mate of the remaining expenditures necessary to implement the
remediation and other work at the site. As at other sites, the
Corporation is pursuing claims for contribution to site clean-up
costs against other potentially responsible parties (PRPs),
including the U.S. Government.
The Corporation has been conducting remediation activi-
ties to address soil and groundwater contamination by chlori-
nated solvents at its former operations in Great Neck, New York
which it acquired as part of its acquisition of Loral Corporation
in 1996. This work is being done pursuant to a series of orders
and agreements with the New York State Department of
Environmental Conservation beginning with a 1991 adminis-
trative order entered by Unisys Tactical Defense Systems, a
predecessor company at the site. The remediation work associ-
ated with this site includes work performed on the site itself, as
well as implementation of an interim remedial measure intend-
ed to address an off-site plume of groundwater contamination.
Future costs are estimated to be approximately $50 million.
This amount is included in the consolidated balance sheet at
December 31, 2003. As at other sites, the Corporation is pursu-
ing claims against other PRPs, including the U.S. Government,
for contribution to site clean-up costs.
Since 1990, the Corporation has been responding to vari-
ous consent decrees and orders relating to soil and regional
groundwater contamination in the San Fernando Valley associ-
ated with the Corporation’s former operations in Burbank and
Glendale, California. Among other things, these consent
decrees and orders obligate the Corporation to construct and
fund the operations of soil and groundwater treatment facilities
in Burbank and Glendale, California through 2018 and 2012,
respectively; however, responsibility for the long-term opera-
tion of these facilities was assumed by the respective localities
in 2001. The Corporation has been successful in limiting its
financial responsibility for these activities to date to its pro rata