Lockheed Martin 2005 Annual Report Download - page 64
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LockheedMartinCorporation
NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS
December31,2005
TheLockheedMartinCorporationSalariedSavingsPlan
is a defined contribution plan with a 401(k) feature that
includesanESOP.TheESOPpurchased34.8millionsharesof
the Corporation’s common stock in 1989 with the proceeds
froma$500millionnoteissuewhichwasguaranteedbythe
Corporation.ThefinalpaymentonthedebtwasmadeinMay
2004.TheCorporation’smatchinyearspriorto2005waspar-
tiallyfulfilledwithstockreleasedfromtheESOPatapproxi-
mately 2.2 million shares per year based upon the debt
repayment schedule. Compensation costs recognized relative
totheESOPshareswere$56millionand$108millionin2004
and 2003, respectively. The remainder of the Corporation’s
matchtotheSalariedSavingsPlanwasfulfilledthroughpur-
chases of common stock from participant account balance
reallocations or through newly issued shares from the
Corporation. Interest incurred on the ESOP debt, as well as
the weighted average unallocated ESOP shares excluded in
calculating earnings per share, in 2004 and 2003 were not
material. The ESOP held approximately 46.1 million issued
andoutstandingsharesoftheCorporation’scommonstockat
December31,2005,allofwhichwereallocatedtoparticipant
accounts.
Certainplansforhourlyemployeesincludeanon-leveraged
ESOP. In one suchplan, the matchis made,generallyatthe
electionoftheparticipant,ineithertheCorporation’scommon
stockorcashwhichisinvestedattheparticipant’sdirectionin
oneoftheplan’sotherinvestmentoptions.TheCorporation’s
contributionstotheseplansweremadethroughsmallamounts
ofnewlyissuedsharesfromtheCorporationorcashcontrib-
uted to the ESOP trust which was used by the trustee, if so
elected, to purchase common stock from participant account
balance reallocations or in the open market for allocation to
participantaccounts.ThisESOPtrustheldapproximately2.7
million issued and outstanding shares of the Corporation’s
commonstockatDecember31,2005,allofwhichwereallo-
catedtoparticipantaccounts.
Defined benefit pension plans, and retiree medical and life
insurance plans—Most employees hired on or before
December 31, 2005 are covered by defined benefit pension
plans, andcertainhealthcareand lifeinsurancebenefits are
provided to eligible retirees by the Corporation. Effective
January 1, 2006, new non-union represented employees are
notbeingcoveredbythedefinedbenefitpensionplans,butare
eligible to participate in defined contribution plans. The
Corporation currently plans to offer those employees the
abilitytoparticipateinitsretireemedicalplans,butwillnot
subsidize the cost of their participation effective January 1,
2006. The Corporation has made contributions to trusts
(includingVoluntaryEmployees’BeneficiaryAssociationtrusts
and 401(h)accounts,theassets ofwhichwillbeused to pay
expenses of certain retiree medical plans) established to pay
future benefits to eligible retirees and dependents. The
CorporationusesDecember31asitsmeasurementdate.Benefit
obligations as of the end of each year reflect assumptions in
effect as of those dates. Net pension and net retiree medical
costsforeachoftheyearspresentedwerebasedonassumptions
ineffectattheendoftherespectiveprecedingyear.
Thefollowingprovidesareconciliationofbenefitobliga-
tions,planassetsandfundedstatusoftheplans:
DefinedBenefit
PensionPlans
RetireeMedical
andLife
InsurancePlans
(Inmillions) 2004 2004
Benefitobligationsat
beginningofyear $24,364 $3,810
Servicecost 743 49
Interestcost 1,497 225
Benefitspaid (1,326) (355)
Actuariallosses 1,731 7
Amendments 6 (2)
Participants’contributions — 93
Benefitobligationsat
endofyear $27,015 $3,827