Lockheed Martin 2005 Annual Report Download - page 55

   
Lockheed฀Martin฀Corporation
The฀accumulated฀balance฀of฀$(1,553)฀million฀of฀other฀com-
prehensive฀ income฀ (loss)฀ at฀ December฀ 31,฀ 2005฀ included฀ the฀
minimum฀pension฀liability฀of฀$(1,629)฀million,฀offset฀primarily฀
by฀net฀unrealized฀gains฀from฀available-for-sale฀investments.
Recent฀accounting฀pronouncements—In฀2005,฀the฀Corporation฀
adopted฀ the฀Financial฀ Accounting฀Standards฀Board’s฀(FASB)฀
Staff฀ Position฀ (FSP)฀ 106-2,฀ Accounting฀ and฀ Disclosure฀
Requirements฀ Related฀ to฀ the฀ Medicare฀ Prescription฀ Drug,฀
Improvement฀and฀Modernization฀Act฀of฀2003.฀The฀impact฀ of฀
its฀ adoption฀ was฀ a฀ reduction฀ of฀ the฀ FAS฀ 106฀ postretirement฀
expense฀as฀well฀as฀a฀reduction฀of฀costs฀determined฀under฀U.S.฀
Government฀ Cost฀ Accounting฀ Standards฀ for฀ the฀ year฀ ended฀
December฀31,฀2005.฀The฀adoption฀of฀FSP฀106-2฀did฀not฀have฀a฀
material฀ impact฀ on฀ the฀ Corporation’s฀ results฀ of฀ operations,฀
financial฀position฀or฀cash฀flows฀for฀the฀year฀ended฀December฀31,฀
2005.฀ See฀ Note฀ 13—Postretirement฀ Benefit฀ Plans฀ for฀ addi-
tional฀information฀regarding฀the฀adoption฀of฀FSP฀106-2.฀
The฀ Corporation฀ also฀ adopted฀ FASB฀ Interpretation฀ No.฀
(FIN)฀ 47,฀ Accounting฀ for฀ Conditional฀ Asset฀ Retirement฀
Obligations—an฀interpretation฀of฀FASB฀Statement฀No.฀143,฀in฀
the฀fourth฀ quarter฀of฀2005.฀FIN฀47฀clarifies฀the฀term฀“condi-
tional฀ asset฀ retirement฀ obligation”฀ as฀ used฀ in฀ FAS฀ 143,฀
Accounting฀ for฀ Asset฀ Retirement฀ Obligations,฀ and฀ requires฀
that฀a฀liability฀and฀a฀corresponding฀increase฀in฀the฀value฀of฀the฀
underlying฀asset฀be฀recorded,฀and฀depreciation฀on฀the฀increased฀
asset฀value฀be฀expensed,฀if฀the฀fair฀value฀of฀the฀obligation฀can฀
be฀reasonably฀estimated.฀The฀types฀of฀asset฀retirement฀obliga-
tions฀that฀are฀covered฀by฀FIN฀47฀are฀those฀for฀which฀an฀entity฀
has฀a฀legal฀ obligation฀to฀ perform฀an฀asset฀retirement฀activity,฀
even฀though฀the฀ timing฀and/or฀method฀of฀settling฀the฀obliga-
tion฀are฀conditional฀on฀a฀future฀event฀that฀may฀or฀may฀not฀be฀
within฀the฀control฀of฀the฀entity.฀An฀example฀of฀a฀condition฀giv-
ing฀ rise฀ to฀ an฀ asset฀ retirement฀ obligation฀ is฀ the฀ presence฀ of฀
embedded฀asbestos,฀radiation฀sources฀or฀other฀regulated฀mate-
rials฀in฀buildings฀or฀equipment.฀FIN฀47฀also฀clarifies฀when฀an฀
entity฀would฀have฀sufficient฀information฀to฀reasonably฀estimate฀
the฀fair฀value฀of฀an฀asset฀retirement฀obligation.฀The฀adoption฀of฀
FIN฀ 47฀ did฀ not฀ have฀ a฀ material฀ impact฀ on฀ the฀ Corporation’s฀
results฀ of฀ operations฀ or฀ financial฀ position.฀ This฀ is฀ primarily฀
due฀to฀the฀fact฀that฀the฀fair฀values฀of฀the฀majority฀of฀its฀asset฀
retirement฀ obligations฀ could฀ not฀ be฀ reasonably฀ estimated฀
because฀ they฀ had฀ indeterminate฀ settlement฀ dates,฀ since฀ the฀
range฀ of฀ time฀ over฀ which฀ it฀ may฀ settle฀ the฀ obligations฀ is฀
unknown฀and฀could฀not฀be฀estimated.฀Consistent฀with฀the฀pro-
visions฀of฀FIN฀47,฀each฀obligation฀will฀be฀recorded฀at฀the฀time฀
the฀settlement฀date฀is฀no฀longer฀indeterminate฀and฀the฀obligation฀
can฀be฀reasonably฀estimated.฀

In฀ March฀ 2005,฀ the฀ Corporation฀ completed฀ its฀ purchase฀ of฀
The฀ SYTEX฀ Group,฀Inc.฀(SYTEX).฀The฀total฀purchase฀price฀
related฀ to฀ the฀Corporation’s฀acquisition฀of฀SYTEX,฀ including฀
transaction-related฀ costs,฀ was฀ approximately฀ $480฀ million.฀
Approximately฀$380฀million฀of฀the฀purchase฀price฀was฀paid฀in฀
cash฀at฀ closing,฀with฀most฀of฀the฀ remainder฀payable฀ in฀2006.฀
The฀acquisition฀was฀accounted฀for฀under฀the฀purchase฀method฀
of฀accounting.฀Purchase฀accounting฀adjustments฀were฀recorded฀
by฀allocating฀the฀purchase฀price฀to฀the฀assets฀acquired฀and฀lia-
bilities฀ assumed฀ based฀ on฀ their฀ estimated฀ fair฀ values,฀ and฀
included฀recording฀goodwill฀of฀approximately฀$395฀million,฀of฀
which฀ $360฀ million฀ will฀ be฀ amortized฀ for฀ tax฀ purposes.฀ The฀
acquisition฀expands฀the฀Corporation’s฀information฀technology฀
solutions฀ and฀ technical฀ support฀ services฀ businesses฀ with฀ the฀
U.S.฀ Department฀ of฀ Defense฀ and฀ other฀ federal฀ agencies.฀ The฀
operations฀ of฀ SYTEX฀ are฀ included฀ in฀ the฀ Information฀ &฀
Technology฀Services฀business฀segment.฀
In฀ 2005,฀ the฀ Corporation฀ completed฀ the฀ acquisitions฀ of฀
STASYS฀ Limited,฀ a฀ U.K.-based฀ technology฀ and฀ consulting฀
firm฀ specializing฀ in฀ network฀ communications฀ and฀ defense฀
interoperability,฀which฀is฀included฀ in฀our฀Integrated฀Systems฀
&฀Solutions฀business฀segment;฀INSYS฀Group฀Limited,฀a฀U.K.-
based฀ diversified฀ supplier฀ of฀ military฀ communications฀ sys-
tems,฀weapons฀systems฀and฀advanced฀analysis฀services,฀which฀
is฀included฀in฀our฀Electronic฀Systems฀business฀segment;฀and฀
Coherent฀ Technologies,฀ Inc.,฀ a฀ U.S.-based฀ supplier฀ of฀ high-
performance,฀ laser-based฀ remote฀ sensing฀ systems,฀ which฀ is฀
included฀in฀ our฀Space฀Systems฀business฀segment.฀The฀aggre-
gate฀cash฀purchase฀price฀for฀these฀three฀acquisitions฀was฀$180฀
million.฀Purchase฀ accounting฀adjustments฀included฀recording฀
combined฀ goodwill฀ of฀ $164฀ million,฀ none฀ of฀ which฀ will฀ be฀
amortized฀for฀tax฀purposes.฀These฀acquisitions฀were฀not฀mate-
rial฀to฀our฀consolidated฀results฀of฀operations฀for฀2005.฀
In฀ November฀ 2003,฀ the฀ Corporation฀ and฀ Affiliated฀
Computer฀Services,฀Inc.฀(ACS)฀completed฀transactions฀whereby฀
the฀ Corporation฀ acquired฀ ACS’฀ federal฀ government฀ informa-
tion฀technology฀(IT)฀business,฀and฀ACS฀concurrently฀acquired฀
the฀Corporation’s฀commercial฀IT฀business.฀The฀total฀purchase฀
price฀related฀to฀the฀Corporation’s฀acquisition฀of฀ACS’฀federal฀
government฀ IT฀ business,฀ including฀ transactions-related฀ costs,฀
was฀approximately฀$585฀million.฀The฀accounting฀for฀the฀acqui-
sition฀ included฀ recording฀ an฀ intangible฀ asset฀ of฀ $57฀ million฀