Lockheed Martin 2005 Annual Report Download - page 59

   

The฀ Corporation’s฀ long-term฀debt฀is฀ primarily฀in฀the฀ form฀of฀
publicly฀issued,฀fixed-rate฀and฀variable-rate฀notes฀and฀deben-
tures,฀as฀follows:
(In฀millions) Interest฀rate  2004
Notes฀due฀12/01/2005 ฀฀฀7.95%   $฀ 14
Notes฀due฀5/15/2006 7.25  205
Medium฀Term฀Notes฀due฀2006-7 7.70–8.66  64
Notes฀due฀6/15/2008 7.70  105
Notes฀due฀12/01/2009 8.20  327
Debentures฀due฀4/15/2013 7.375  150
Debentures฀due฀5/01/2016 7.65  600
Debentures฀due฀1/15/2023 8.375  100
Debentures฀due฀9/15/2023 7.0  200
Notes฀due฀6/15/2024 8.375  216
Debentures฀due฀6/15/2025 7.625  150
Debentures฀due฀5/01/2026 7.75  423
Debentures฀due฀12/01/2029 8.5  1,250
Convertible฀Debentures฀฀
฀ due฀8/15/2033 LIBOR฀-0.25  1,000
Debentures฀due฀5/01/2036 7.20  300
Other  15
 5,119
Less฀current฀maturities  15
 $฀5,104
In฀the฀fourth฀quarter฀of฀2005,฀the฀Corporation฀repurchased฀
$83฀million฀of฀outstanding฀long-term฀debt฀in฀the฀open฀market.฀
The฀charge฀associated฀with฀those฀repurchases฀was฀not฀material฀
to฀the฀Corporation’s฀results฀of฀operations฀or฀financial฀position.
In฀the฀fourth฀quarter฀of฀2004,฀the฀Corporation฀completed฀
tender฀ offers฀ to฀ purchase฀ for฀ cash฀ $285฀ million฀ in฀ principal฀
amount฀of฀its฀outstanding฀7.70%฀notes฀due฀June฀15,฀2008฀and฀
$666฀ million฀ in฀ principal฀ amount฀ of฀ its฀ 8.20%฀ notes฀ due฀
December฀1,฀2009.฀The฀Corporation฀recorded฀a฀charge,฀net฀of฀
state฀income฀tax฀benefits,฀totaling฀$154฀million฀in฀other฀income฀
and฀expenses฀related฀to฀the฀tender฀offers.฀The฀charge฀reduced฀
2004฀net฀earnings฀by฀$100฀million฀($0.22฀per฀share).
In฀2003,฀the฀Corporation฀issued฀$1.0฀billion฀in฀floating฀rate฀
convertible฀debentures฀due฀in฀2033.฀The฀debentures฀bear฀inter-
est฀at฀a฀rate฀equal฀to฀three-month฀LIBOR฀less฀25฀basis฀points,฀
reset฀quarterly.฀The฀interest฀rate฀in฀effect฀at฀December฀31,฀2005฀
was฀ 4.09%.฀ Interest฀ on฀ the฀ debentures฀ 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฀of฀the฀debenture,฀at฀maturity.฀
The฀ debentures฀ are฀ convertible฀ by฀ holders฀ into฀ shares฀ of฀ the฀
Corporation’s฀common฀stock฀on฀a฀ contingent฀basis฀under฀the฀
circumstances฀described฀in฀the฀indenture฀related฀to฀these฀secu-
rities฀ as฀ discussed฀ below.฀ The฀ debentures฀ are฀ not฀ convertible฀
unless฀the฀price฀of฀the฀Corporation’s฀common฀stock฀is฀greater฀
than฀or฀equal฀to฀130%฀of฀the฀applicable฀conversion฀price฀for฀a฀
specified฀ period฀ during฀ a฀ quarter,฀ or฀ unless฀ certain฀ events฀
occur฀ including,฀ among฀ others:฀ Lockheed฀ Martin฀ calling฀ the฀
debentures฀ for฀ redemption;฀ Lockheed฀ Martin฀ distributing฀ to฀
all฀ holders฀ of฀ its฀ common฀ stock฀ certain฀ rights฀ to฀ purchase฀
shares฀ of฀ its฀ common฀ stock฀ at฀ less฀ than฀ market฀ value฀ on฀ the฀
trading฀day฀immediately฀preceding฀the฀declaration฀date฀of฀the฀
distribution;฀and฀the฀credit฀rating฀assigned฀to฀the฀debentures฀by฀
either฀Moody’s฀or฀Standard฀&฀Poor’s฀is฀lower฀than฀Ba1฀or฀BB+.฀
The฀conversion฀price฀was฀$75.00฀per฀share฀at฀December฀31,฀
2005,฀and฀is฀expected฀to฀change฀over฀time฀as฀provided฀for฀in฀
the฀ indenture฀ agreement.฀ The฀ conversion฀ price฀ is฀ adjusted฀
upon฀the฀occurrence฀ of฀certain฀events฀including,฀but฀not฀lim-
ited฀to,฀the฀following:฀the฀payment฀of฀dividends฀and฀other฀dis-
tributions฀ on฀ Lockheed฀ Martin฀ common฀ stock,฀ payable฀
exclusively฀in฀shares฀of฀our฀stock;฀the฀issuance฀to฀all฀holders฀of฀
Lockheed฀Martin฀common฀stock฀of฀rights฀that฀ allow฀them฀to฀
purchase฀shares฀of฀its฀common฀stock฀at฀less฀than฀market฀price฀
during฀ a฀ specified฀ period;฀ distributions฀ by฀ Lockheed฀ Martin฀
consisting฀ exclusively฀ of฀ cash฀ to฀ all฀ holders฀ of฀ our฀ common฀
stock,฀ excluding฀ any฀ quarterly฀ cash฀ dividend฀ that฀ does฀ not฀
exceed฀$0.12฀per฀share.
The฀ Corporation฀ has฀ irrevocably฀ elected฀ and฀ agreed฀ to฀
pay฀only฀cash฀in฀lieu฀of฀common฀stock฀for฀the฀accreted฀princi-
pal฀amount฀of฀the฀debentures฀in฀respect฀of฀its฀conversion฀obli-
gations฀ described฀ above.฀ The฀ Corporation฀ has฀ retained฀ the฀
right,฀however,฀to฀elect฀to฀satisfy฀any฀and฀all฀conversion฀obli-
gations฀ in฀ excess฀ of฀ the฀ accreted฀ principal฀ amount฀ of฀ the฀
debentures฀in฀cash฀or฀common฀stock฀or฀a฀combination฀of฀cash฀
and฀ common฀ stock.฀ There฀ was฀ no฀ amount฀ exceeding฀ the฀
accreted฀ principal฀at฀the฀end฀of฀2005,฀nor฀will฀there฀be฀ until฀
the฀ market฀ price฀ exceeds฀ the฀ conversion฀ price฀ of฀ the฀
Corporation’s฀ stock.฀ Accordingly,฀ the฀ debentures฀ had฀ no฀
impact฀ on฀ the฀ calculation฀ of฀ diluted฀ earnings฀ per฀ share฀ for฀
2005.฀The฀Corporation฀also฀has฀the฀right฀to฀redeem฀any฀or฀all฀
of฀the฀debentures฀at฀any฀time฀after฀August฀15,฀2008.
Lockheed฀Martin฀Corporation