Lockheed Martin 2007 Annual Report Download - page 58

The following table shows the CAS funding that is included as expense in the segments’ operating results, the related
FAS expense, and the resulting FAS/CAS pension adjustment:
(In millions) 2007 2006 2005
FAS 87 expense $(687) $(938) $(1,124)
Less: CAS expense and funding (629) (663) (498)
FAS/CAS pension adjustment – expense $ (58) $(275) $ (626)
The FAS 87 expense decreased in 2007 due to an increase in the discount rate and other factors such as the effects of the
actual return on plan assets. FAS 87 expense decreased in 2006 primarily due to the reduction in the rate of future
compensation increases as well as the growth in plan assets in 2006, including contributions we made to the pension trust.
CAS are a major factor in determining our pension funding requirements and govern the extent to which our pension
costs are allocable to and recoverable under contracts with the U.S. Government. The total funding requirement for pension
plans under CAS in 2007 was $629 million, which was recorded in our segment results of operations. That amount was
funded through discretionary prepayments we made to the plans in 2006. For 2008, we expect our funding requirements and
expense under CAS to decrease. Also in 2008, funding in addition to the amount calculated under CAS will likely be
required under Internal Revenue Code (IRC) rules. Any additional amounts computed under the IRC rules are considered to
be prepayments under the CAS rules, and are recorded on our Balance Sheet and recovered in future periods. In 2007, 2006
and 2005, we made discretionary prepayments of $335 million, $594 million and $980 million to the pension trust.
Prepayments reduce the amount of future cash funding that will be required under the CAS and IRC rules and, as a result, we
expect to have no required cash contributions to the pension trust in 2008.
Certain items are excluded from segment results as part of senior management’s evaluation of segment operating
performance consistent with the management approach permitted by FAS 131, Disclosures about Segments of an Enterprise
and Related Information. For example, gains and losses related to the disposition of businesses or investments managed by
Corporate, as well as certain other Corporate activities, are not considered by management in evaluating the operating
performance of business segments. Therefore, for purposes of segment reporting, the following items were included in
Unallocated Corporate income (expense), net for 2007, 2006 and 2005:
(In millions, except per share data)
Operating
Profit
(Loss)
Net
Earnings
(Loss)
Earnings
(Loss)
Per Share
Year ended December 31, 2007
Gain on sale of interest in Comsat International $ 25 $ 16 $ 0.04
Gain on sale of land in California 25 16 0.04
Earnings from reversal of legal reserves due to settlement 21 14 0.03
$ 71 $ 46 $ 0.11
Year ended December 31, 2006
Gain on sale of interest in Inmarsat $127 $ 83 $ 0.19
Gains on sale of land 51 33 0.08
Earnings from expiration of AES transaction indemnification 29 19 0.04
Gain on sale of Space Imaging’s assets 23 15 0.03
$230 $150 $ 0.34
Year ended December 31, 2005
Gains related to Inmarsat transactions $126 $ 82 $ 0.18
Gain on sale of interest in Intelsat 47 31 0.07
Gain on sale of interest in NeuStar 30 19 0.04
Impairment charge related to a satellite (30) (19) (0.04)
$173 $113 $ 0.25
The change in the “Other, net” component of Unallocated Corporate income (expense), net from 2006 to 2007 and from
2005 to 2006 primarily was due to lower expense associated with a number of corporate activities.
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