Lockheed Martin 2005 Annual Report Download - page 70

   
The฀ Corporation฀ has฀been฀in฀ litigation฀with฀certain฀resi-
dents฀of฀Redlands,฀California฀since฀1997฀regarding฀allegations฀
of฀personal฀injury,฀property฀damage,฀and฀other฀tort฀claims฀on฀
behalf฀of฀individuals฀ and฀putative฀classes฀of฀individuals฀ aris-
ing฀from฀its฀alleged฀contribution฀to฀regional฀groundwater฀con-
tamination.฀In฀March฀and฀April฀2005,฀the฀California฀Court฀of฀
Appeal฀ issued฀ orders฀ staying฀ all฀ trial฀ and฀ appellate฀ proceed-
ings฀pending฀further฀order฀of฀the฀Court,฀including฀staying฀the฀
trial฀of฀14฀claims฀that฀was฀to฀have฀commenced฀in฀May฀2005฀in฀
the฀ California฀ Superior฀ Court฀ for฀ San฀ Bernardino฀ County.฀
Following฀an฀unsuccessful฀settlement฀conference,฀the฀trial฀pro-
ceedings฀remain฀stayed฀pending฀further฀review฀and฀action฀by฀
the฀Court฀of฀Appeal.฀
Environmental฀matters—The฀Corporation฀is฀involved฀in฀envi-
ronmental฀ proceedings฀ and฀ potential฀ proceedings฀ relating฀ to฀
soil฀ and฀ groundwater฀ contamination,฀ disposal฀ of฀ hazardous฀
waste฀and฀other฀environmental฀matters฀at฀several฀of฀its฀current฀
or฀ former฀ facilities.฀ At฀ December฀ 31,฀ 2005฀ and฀ 2004,฀ the฀
aggregate฀ amount฀ of฀ liabilities฀ recorded฀ relative฀ to฀ environ-
mental฀ matters฀ was฀ $464฀ million฀ and฀ $420฀ million,฀ respec-
tively.฀ Environmental฀ cleanup฀ activities฀ usually฀ span฀ several฀
years,฀which฀makes฀estimating฀liabilities฀more฀judgmental฀due฀
to,฀ for฀ example,฀ changing฀ remediation฀ technologies,฀ assess-
ments฀of฀the฀extent฀of฀contamination฀and฀continually฀evolving฀
regulatory฀environmental฀standards.฀These฀factors฀are฀consid-
ered฀in฀estimates฀of฀the฀timing฀and฀amount฀of฀any฀future฀costs฀
that฀ may฀ be฀ required฀ for฀ remediation฀ actions.฀ The฀ recorded฀
liabilities฀have฀not฀been฀discounted,฀as฀the฀timing฀of฀cash฀pay-
ments฀is฀not฀fixed฀or฀cannot฀be฀reliably฀determined.฀
About฀60%฀of฀the฀liability฀at฀December฀31,฀2005฀relates฀to฀
sites฀ in฀Redlands,฀ Burbank,฀ and฀ Glendale,฀ California,฀and฀in฀
Great฀ Neck,฀ New฀ York,฀ mainly฀ for฀ remediation฀ of฀ soil฀ and฀
groundwater฀ contamination.฀ The฀ remainder฀ of฀ the฀ liability฀
related฀to฀other฀properties฀(including฀current฀operating฀facili-
ties฀and฀certain฀facilities฀operated฀in฀prior฀years)฀for฀which฀the฀
Corporation’s฀obligation฀is฀probable฀and฀the฀financial฀exposure฀
can฀be฀estimated.฀In฀cases฀where฀a฀date฀to฀complete฀activities฀
at฀a฀particular฀environmental฀site฀cannot฀be฀estimated฀by฀refer-
ence฀ to฀ agreements฀ or฀ otherwise,฀ the฀ Corporation฀ projects฀
costs฀over฀an฀appropriate฀time฀frame฀not฀to฀exceed฀20฀ years.฀
The฀ extent฀ of฀ the฀ Corporation’s฀ financial฀ exposure฀ cannot฀ in฀
all฀cases฀be฀reasonably฀determined฀at฀this฀time.฀The฀Corporation฀
also฀ is฀ pursuing฀ claims฀ for฀ contribution฀ to฀ site฀ cleanup฀ costs฀
against฀other฀potentially฀responsible฀parties฀(PRPs),฀including฀
the฀U.S.฀Government.฀
At฀ Redlands,฀ California,฀ in฀ response฀ to฀ administrative฀
orders฀issued฀by฀the฀California฀Regional฀Water฀Quality฀Control฀
Board,฀the฀Corporation฀is฀investigating฀the฀impact฀and฀poten-
tial฀ remediation฀ of฀ regional฀ groundwater฀ contamination฀ by฀
perchlorates฀and฀chlorinated฀solvents฀and฀has฀submitted฀a฀plan฀
approved฀ by฀ the฀ Regional฀ Board฀ to฀ maintain฀ public฀ water฀
supplies฀with฀respect฀to฀chlorinated฀solvents฀during฀the฀inves-
tigation.฀Following฀further฀study฀of฀perchlorate฀health฀effects฀
by฀ both฀ the฀ National฀ Academy฀ of฀ Sciences฀ and฀ by฀ the฀ U.S.฀
EPA,฀California฀reaffirmed฀ a฀six฀ppb฀public฀health฀ goal฀for฀
perchlorates฀in฀March฀2005.฀Although฀the฀six฀ppb฀public฀health฀
goal฀is฀not฀a฀legally฀enforceable฀drinking฀water฀standard,฀the฀
Corporation฀has฀developed฀and฀is฀in฀the฀process฀of฀implement-
ing฀a฀preliminary฀remediation฀plan฀to฀meet฀the฀six฀ppb฀goal฀in฀
anticipation฀ that฀ California฀ may฀ promulgate฀ an฀ enforceable฀
standard฀at฀that฀level.฀
฀The฀Corporation฀also฀is฀conducting฀remediation฀activities฀
pursuant฀to฀various฀consent฀decrees฀and฀orders฀relating฀to฀soil฀
or฀groundwater฀contamination฀at฀certain฀sites฀of฀former฀opera-
tions,฀including฀sites฀in฀Burbank฀and฀Glendale,฀California฀and฀
Great฀ Neck,฀ New฀ York.฀ Under฀ the฀ Burbank฀ and฀ Glendale฀
orders,฀ the฀ Corporation,฀ among฀ other฀ things,฀ is฀ obligated฀ to฀
construct฀ and฀ fund฀ the฀ operations฀ of฀ soil฀ and฀ groundwater฀
treatment฀ facilities฀ through฀ 2018฀ and฀ 2012,฀ respectively.฀
Responsibility฀for฀the฀long-term฀operation฀of฀the฀Burbank฀and฀
Glendale฀facilities฀has฀been฀assumed฀by฀the฀respective฀locali-
ties.฀ In฀ addition,฀ under฀ an฀ agreement฀ related฀ to฀ the฀ Burbank฀
and฀ Glendale฀ remediation฀ activities,฀ the฀ U.S.฀ Government฀
reimburses฀ the฀ Corporation฀ in฀ an฀ amount฀ equal฀ to฀ approxi-
mately฀50%฀of฀expenditures฀for฀certain฀remediation฀activities฀
in฀its฀capacity฀as฀a฀PRP฀under฀the฀Comprehensive฀Environmental฀
Response,฀Compensation฀and฀Liability฀Act฀(CERCLA).
Letters฀ of฀ credit฀ and฀ other฀ matters—The฀ Corporation฀ has฀
entered฀into฀standby฀letter฀of฀credit฀agreements,฀surety฀bonds฀
and฀ other฀ arrangements฀ with฀ financial฀ institutions฀ primarily฀
relating฀to฀advances฀received฀from฀customers฀and/or฀the฀guar-
antee฀ of฀ future฀ performance฀ on฀ certain฀ of฀ its฀ contracts.฀ The฀
Corporation฀ had฀ total฀ outstanding฀ letters฀ of฀ credit฀ and฀ other฀
arrangements฀ aggregating฀ approximately฀ $3.1฀ billion฀ at฀
December฀ 31,฀ 2005฀ and฀ $3.0฀ billion฀ at฀ December฀ 31,฀ 2004.฀
Letters฀of฀credit฀and฀surety฀bonds฀are฀available฀for฀draw฀down฀
in฀the฀event฀of฀the฀Corporation’s฀nonperformance.
Lockheed฀Martin฀Corporation
NOTES฀TO฀CONSOLIDATED฀FINANCIAL฀STATEMENTS
December฀31,฀2005