Lockheed Martin 2005 Annual Report Download - page 60

   
Lockheed฀Martin฀Corporation
NOTES฀TO฀CONSOLIDATED฀FINANCIAL฀STATEMENTS
December฀31,฀2005
In฀2003,฀the฀Corporation฀completed฀the฀purchase฀of฀a฀total฀
principal฀ amount฀ of฀ $1.4฀ billion฀ of฀ notes฀ and฀ debentures฀
through฀a฀combination฀of฀tender฀offers,฀redemption฀of฀callable฀
debentures฀ and฀ repurchases฀ in฀ the฀ open฀ market.฀ The฀
Corporation฀recorded฀charges,฀net฀of฀state฀income฀tax฀benefits,฀
totaling฀$146฀million฀in฀other฀income฀and฀expenses฀related฀to฀
these฀transactions.฀The฀charges฀reduced฀2003฀net฀earnings฀by฀
$96฀million฀($0.21฀per฀share).
The฀registered฀holders฀of฀$300฀million฀of฀40-year฀deben-
tures฀issued฀in฀1996฀may฀elect,฀between฀March฀1฀and฀April฀1,฀
2008,฀ to฀ have฀ their฀ debentures฀ repaid฀ by฀ the฀ Corporation฀ on฀
May฀1,฀2008.
At฀ December฀ 31,฀ 2005,฀ the฀ Corporation฀ had฀ in฀ place฀ a฀
$1.5฀billion฀revolving฀credit฀facility฀which฀expires฀in฀July฀2010.฀
There฀ were฀ no฀ borrowings฀ outstanding฀ under฀ the฀ facility฀ at฀
December฀ 31,฀ 2005.฀ Borrowings฀ under฀ the฀ credit฀ facility฀
would฀ be฀ unsecured฀ and฀ bear฀ interest฀ at฀ rates฀ based,฀ at฀ the฀
Corporation’s฀option,฀on฀the฀Eurodollar฀rate฀or฀a฀bank฀defined฀
Base฀ Rate.฀ Each฀ bank’s฀ obligation฀ to฀ make฀ loans฀ under฀ the฀
credit฀ facility฀ is฀ subject฀ to,฀ among฀ other฀ things,฀ the฀
Corporation’s฀compliance฀with฀various฀representations,฀war-
ranties฀and฀covenants,฀including฀covenants฀limiting฀the฀abil-
ity฀ of฀ the฀ Corporation฀ and฀ certain฀ of฀ its฀ subsidiaries฀ to฀
encumber฀ assets฀ and฀ a฀ covenant฀ not฀ to฀ exceed฀ a฀ maximum฀
leverage฀ratio.฀
The฀Corporation’s฀scheduled฀long-term฀debt฀maturities฀for฀
the฀five฀years฀following฀December฀31,฀2005฀are:฀$202฀million฀
in฀2006;฀$33฀million฀in฀2007;฀$103฀million฀in฀2008;฀$247฀mil-
lion฀in฀2009;฀$1฀million฀in฀2010;฀and฀$4,400฀million฀thereafter.
The฀ estimated฀fair฀ values฀of฀the฀ Corporation’s฀ long-term฀
debt฀ instruments฀ at฀ December฀ 31,฀ 2005฀ aggregated฀ approxi-
mately฀ $6.2฀ billion,฀ compared฀ with฀ a฀ carrying฀ amount฀ of฀
approximately฀ $5.0฀ billion.฀ The฀ fair฀ values฀ were฀ estimated฀
based฀ on฀quoted฀ market฀prices฀for฀those฀instruments฀ that฀are฀
publicly฀traded.฀For฀privately฀placed฀debt,฀the฀fair฀values฀were฀
estimated฀based฀on฀the฀quoted฀market฀prices฀for฀similar฀issues,฀
or฀ on฀ current฀ rates฀ offered฀ to฀ the฀ Corporation฀ for฀ debt฀ with฀
similar฀remaining฀maturities.฀Unless฀otherwise฀indicated฀else-
where฀ in฀ the฀ notes฀ to฀ the฀ financial฀ statements,฀ the฀ carrying฀
values฀of฀the฀Corporation’s฀other฀financial฀instruments฀approx-
imate฀their฀fair฀values.
Interest฀payments฀were฀$356฀ million฀ in฀2005,฀$420฀ mil-
lion฀in฀2004฀and฀$519฀million฀in฀2003.

The฀ provision฀for฀federal฀and฀ foreign฀income฀taxes฀consisted฀
of฀the฀following฀components:
(In฀millions)  2004 2003
Federal฀income฀taxes
฀ Current  $445 $฀(14)
฀ Deferred  (58) 467
฀ ฀ Total฀federal฀income฀taxes  387 453
Foreign฀income฀taxes  11 26
฀ ฀ Total฀income฀taxes฀provided  $398 $479
Net฀provisions฀for฀state฀income฀taxes฀are฀included฀in฀gen-
eral฀and฀administrative฀expenses,฀which฀are฀primarily฀alloca-
ble฀ to฀ U.S.฀ Government฀ contracts.฀ The฀ net฀ state฀ income฀ tax฀
expense฀was฀$92฀million฀for฀2005,฀$78฀million฀for฀2004฀and฀
$38฀million฀for฀2003.
A฀ reconciliation฀ of฀ income฀ tax฀ expense฀ computed฀ using฀
the฀ U.S.฀ federal฀ statutory฀ income฀ tax฀ rate฀ of฀ 35%฀ to฀ actual฀
income฀tax฀expense฀is฀as฀follows:
(In฀millions)  2004 2003
Income฀tax฀expense฀at฀the฀U.S.฀federal฀฀
฀ statutory฀tax฀rate  $฀582 $536
(Reduction)฀increase฀in฀tax฀expense฀from:
฀ ฀Extraterritorial฀income฀฀
฀ exclusion฀benefit  (40) (41)
฀ U.S.฀production฀activity฀benefit  — —
฀ Tax฀deductible฀dividends  (21) (15)
฀ Closure฀of฀IRS฀examination (144) —
฀ Other,฀net  21 (1)
Actual฀income฀tax฀expense  $฀398 $479