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   
Lockheed฀Martin฀Corporation


At฀ December฀ 31,฀ 2005,฀ we฀ had฀ contractual฀ commitments฀ to฀
repay฀debt,฀make฀payments฀under฀operating฀leases,฀settle฀obli-
gations฀related฀to฀agreements฀to฀purchase฀goods฀and฀services,฀
and฀settle฀other฀long-term฀liabilities.฀Capital฀lease฀obligations฀
were฀ negligible.฀ Payments฀ due฀ under฀ these฀ long-term฀ obliga-
tions฀and฀commitments฀are฀as฀follows:
Payments฀Due฀By฀Period
(In฀millions) ฀฀Total
Less฀Than฀฀
1฀Year
1–3฀฀
Years
3–5฀฀
Years
After฀
5฀Years
Long-term฀debt(a) $฀ 4,986 $฀฀ 202 ฀ 136 ฀ 248 $4,400
Operating฀lease฀฀
฀ obligations 1,157 261 386 262 248
Purchase฀obligations
฀ ฀Operating฀฀
฀ activities 23,566 11,001 7,880 2,752 1,933
฀ Capital฀฀
฀ ฀ expenditures 462 344 118 — —
Other฀long-term฀฀
฀ liabilities 1,289 213 256 169 651฀
Total฀contractual฀฀
฀ cash฀obligations $31,460 $12,021 8,776 3,431 $7,232
(a)฀ Long-term฀debt฀includes฀scheduled฀principal฀payments฀only.
Generally,฀ our฀ long-term฀ debt฀ obligations฀ are฀ subject฀ to,฀
along฀ with฀ other฀ things,฀ compliance฀ with฀ certain฀ covenants,฀
including฀covenants฀limiting฀our฀ability฀and฀the฀ability฀of฀cer-
tain฀of฀our฀subsidiaries฀to฀encumber฀our฀assets.
Purchase฀obligations฀related฀to฀operating฀activities฀include฀
agreements฀ and฀ requirements฀ contracts฀ that฀ give฀ the฀ supplier฀
recourse฀ to฀ us฀ for฀ cancellation฀ or฀ nonperformance฀ under฀ the฀
contract฀ or฀ contain฀ terms฀ that฀ would฀ subject฀ us฀ to฀ liquidated฀
damages.฀Such฀agreements฀and฀contracts฀may,฀for฀example,฀be฀
related฀to฀ direct฀materials,฀obligations฀to฀sub-contractors฀ and฀
outsourcing฀ arrangements.฀ Total฀ purchase฀ obligations฀ in฀ the฀
preceding฀ table฀ include฀ approximately฀ $22฀ billion฀ related฀ to฀
contractual฀commitments฀entered฀into฀as฀a฀result฀of฀contracts฀
we฀ have฀ with฀ our฀ U.S.฀ Government฀ customers.฀ However,฀ the฀
U.S.฀ Government฀ would฀ generally฀ be฀ required฀ to฀ pay฀ us฀ for฀
any฀costs฀we฀incur฀relative฀to฀these฀commitments฀if฀they฀were฀
to฀terminate฀the฀related฀contracts฀“for฀convenience”฀pursuant฀
to฀ FAR.฀ For฀ example,฀ if฀ we฀ had฀ commitments฀ to฀ purchase฀
goods฀and฀services฀that฀were฀entered฀into฀as฀a฀result฀of฀a฀spe-
cific฀contract฀we฀received฀from฀our฀U.S.฀Government฀customer฀
and฀the฀customer฀terminated฀the฀contract฀for฀convenience,฀any฀
amounts฀we฀would฀be฀required฀to฀pay฀to฀settle฀the฀related฀com-
mitments,฀as฀well฀as฀amounts฀previously฀incurred,฀would฀gen-
erally฀be฀reimbursed฀by฀the฀customer.฀This฀would฀also฀be฀true฀
in฀cases฀where฀we฀perform฀sub-contract฀work฀for฀a฀prime฀con-
tractor฀under฀a฀U.S.฀Government฀contract.฀The฀termination฀for฀
convenience฀language฀may฀also฀be฀included฀in฀contracts฀with฀
foreign,฀state฀and฀local฀governments.฀In฀addition,฀we฀have฀con-
tracts฀with฀customers฀that฀do฀not฀include฀termination฀for฀con-
venience฀ provisions,฀ including฀ contracts฀ with฀ commercial฀
customers.฀
Total฀ purchase฀ obligations฀ in฀ the฀ preceding฀ table฀ related฀
to฀capital฀expenditures฀generally฀include฀amounts฀for฀facilities฀
and฀equipment฀at฀various฀of฀our฀locations,฀related฀to฀customer฀
contracts.
Amounts฀ related฀ to฀ “Other฀ long-term฀ liabilities”฀ in฀ the฀
preceding฀ table฀ represent฀ the฀ contractual฀ obligations฀ for฀ cer-
tain฀ long-term฀ liabilities฀ recorded฀ as฀ of฀ December฀ 31,฀ 2005.฀
Such฀ amounts฀ mainly฀ include฀ expected฀ payments฀ under฀
deferred฀compensation฀plans,฀non-qualified฀pension฀plans฀and฀
environmental฀liabilities.฀Obligations฀related฀to฀environmental฀
liabilities฀represent฀our฀estimate฀of฀remediation฀payment฀obli-
gations฀ under฀ government฀ consent฀ decrees฀ and฀ agreements,฀
excluding฀amounts฀reimbursed฀by฀the฀U.S.฀Government฀in฀its฀
capacity฀as฀a฀potentially฀responsible฀party฀under฀an฀agreement฀
entered฀into฀in฀2000.
We฀ also฀ may฀ enter฀ into฀ industrial฀ participation฀ agree-
ments,฀sometimes฀referred฀to฀as฀offset฀agreements,฀as฀a฀condi-
tion฀ to฀ obtaining฀ orders฀ for฀ our฀ products฀ and฀ services฀ from฀
certain฀ customers฀ in฀foreign฀countries.฀These฀ agreements฀ are฀
designed฀to฀enhance฀the฀social฀and฀economic฀environment฀of฀
the฀ foreign฀ country฀ by฀ requiring฀ the฀ contractor฀ to฀ promote฀
investment฀in฀the฀country.฀Offset฀agreements฀may฀be฀satisfied฀
through฀activities฀that฀do฀not฀require฀us฀to฀use฀cash,฀including฀
transferring฀ technology,฀ providing฀ manufacturing฀ and฀ other฀
consulting฀support฀to฀in-country฀projects,฀and฀the฀purchase฀by฀
third฀ parties฀ (e.g.,฀ our฀ vendors)฀ of฀ supplies฀ from฀ in-country฀
vendors.฀These฀agreements฀may฀also฀be฀satisfied฀through฀our฀
use฀of฀cash฀for฀such฀activities฀as฀purchasing฀supplies฀from฀in-
country฀ vendors,฀ providing฀ financial฀ support฀ for฀ in-country฀
projects,฀and฀building฀or฀leasing฀facilities฀for฀in-country฀oper-
ations.฀We฀do฀not฀commit฀to฀offset฀agreements฀until฀orders฀for฀
our฀products฀or฀services฀are฀definitive.฀Offset฀programs฀gener-
ally฀extend฀over฀several฀years฀and฀may฀provide฀for฀penalties฀in฀
the฀event฀we฀fail฀to฀perform฀in฀accordance฀with฀offset฀require-
ments.฀ No฀ such฀ penalties฀ have฀ been฀ incurred฀ during฀ the฀ last฀
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