Lockheed Martin 2007 Annual Report Download - page 41

Highlights
The financial section of our Form 10-K describes our ongoing operations, including discussions about particular lines of
business or programs, our ability to finance our operating activities, and trends and uncertainties in our industry and how they
might affect our future operations. We also discuss those items affecting our results that were not considered in senior
management’s assessment of the operating performance of our business segments. We separately disclose these items to
assist in your evaluation of our overall operating performance and financial condition of our consolidated company. We
would like to draw your attention to the following items disclosed in this financial section and where you will find them:
Topic Location(s)
Critical accounting policies:
Contract accounting/revenue recognition Page 37 and page 67
Postretirement benefit plans Page 38 and page 83
Environmental matters Page 39, page 67 and page 89
Goodwill Page 40 and page 67
Stock-based compensation Page 41, page 69 and page 80
Discussion of business segments Page 44 and page 90
Liquidity and cash flows Page 51 and page 64
Capital structure and resources Page 52, page 63, page 65 and page 79
Legal proceedings, commitments and contingencies Page 54 and page 87
Income taxes Page 69 and page 77
Industry Considerations
U.S. Government – Department of Defense Business
The President’s budget proposal for fiscal year 2009 focuses on ensuring America’s economic prosperity and keeping
our country safe. The Administration’s priorities include balancing the budget by 2012, combating terrorism and protecting
the homeland, promoting economic growth, and controlling non-security and entitlement spending. Over half of the
discretionary spending in the budget proposal is allocated to defense and other security needs to be addressed by the
Departments of Defense, Homeland Security, and State – all key customers of ours.
For fiscal year 2009, the President’s budget proposes $515.4 billion for the Department of Defense (DoD), reflecting the
Administration’s commitment to continued modernization of our Armed Forces and sustainment of current capabilities. This
amount, called the base budget, excludes any funding for ongoing military operations in Iraq and Afghanistan or the global
war on terrorism. These costs, discussed below, are requested as emergency supplemental funding. The fiscal year 2009 DoD
base budget is an increase of $35.9 billion, or 7.5%, over the fiscal year 2008 base budget as enacted into law at the end of
2007. The 2009 DoD base budget includes $104.2 billion for procurement of systems and equipment (Procurement) and
$79.6 billion for research, development, test, and evaluation (RDT&E), collectively termed the investment accounts. The
proposed investment budget of $183.8 billion represents a nearly 5% increase in the investment accounts over fiscal year
2008 enacted levels and represents a record-high level of funding for these accounts.
The Operations and Maintenance accounts, which contain the bulk of funding for training, logistics, services, and other
sustainment activities, total approximately $179.8 billion for fiscal year 2009, an increase of $15.6 billion, or nearly 10%,
over fiscal year 2008 enacted levels. The balance of the budget, $151.8 billion, includes amounts for military pay and
benefits, construction, and other activities.
Over the fiscal years 2009-2013, total DoD funding is expected to rise to $549.0 billion in 2013, or 14.4% higher than
the fiscal year 2008 budget. Total proposed funding for the DoD over this five-year period is nearly $2.7 trillion, reflecting
both the significant increase in the same five-year period in the budget proposal submitted in February of 2007, as well as a
small additional increase in this year’s plan.
In addition to the base DoD budget, the Administration is again requesting funding to defray costs for Operation Iraqi
Freedom and Operation Enduring Freedom in Afghanistan. The fiscal year 2009 budget proposal includes $70.0 billion in
supplemental funding for the ongoing war on terrorism, which is $20 billion higher than anticipated in last year’s budget
proposal. This amount reflects only costs anticipated to be incurred in the first several months of fiscal year 2009 to ensure
continuity of funding during the transition to the next Administration, which will begin in January of 2009, and the budget
proposal assumes the next Administration will determine what additional amounts may be required for these activities. The
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