Lockheed Martin 2007 Annual Report Download - page 98

liabilities totaling $189 million, both of which will be reduced as the launch services are provided. The assets relate primarily
to advances we have made to Khrunichev for future launches, and the liabilities relate primarily to advances we have
received from customers for future launches. Any potential earnings impact resulting from our inability to realize the assets
we have recorded related to LKEI and ILS would be partially mitigated by our not recognizing the $67 million deferred net
gain on the transaction.
Investment in ULA
In connection with the formation of ULA (see Note 2), both we and Boeing have each committed to providing up to $25
million in additional capital contributions and $200 million in other financial support to ULA, as required. The non-capital
financial support will be made in the form of a revolving credit facility between us and ULA or guarantees of ULA financing
with third parties, in either case, to the extent necessary for ULA to meet its working capital needs. We have agreed to
provide this support for at least five years from December 1, 2006, the closing date of the transaction, and would expect to
fund our requirements with cash on hand. To satisfy our non-capital financial support commitment, we and Boeing put into
place at closing a revolving credit agreement with ULA. As of December 31, 2006, we had provided a total of $3 million of
additional funding to ULA (see Note 2). We did not provide further funding to ULA during 2007. In addition, both we and
Boeing have cross-indemnified ULA related to certain financial support arrangements (e.g., letters of credit, surety bonds or
foreign exchange contracts provided by either party) and guarantees by us and Boeing of the performance and financial
obligations of ULA under certain launch service contracts. We believe ULA will be able to fully perform its obligations, as it
has done through December 31, 2007, and that it will not be necessary to make payments under the cross-indemnities.
Note 15 – Information on Business Segments
In February 2007, we announced a realignment of our operations to enhance support for critical customer missions and
increase our integration of resources. The realignment included the combination of our Information Technology & Global
Services (IT&GS) and Integrated Systems & Solutions (IS&S) business segments into a new business segment named
Information Systems & Global Services (IS&GS). In addition, the following changes were made as part of this realignment:
• Transportation and Security Solutions, which was previously reported in Electronic Systems, is now part of
IS&GS;
• Our contract to manage the Sandia National Laboratories and our ownership in the joint venture that manages the
Atomic Weapons Establishment in the United Kingdom, which had been part of IT&GS, are now reported in
Electronic Systems; and
• The Aircraft & Logistics Centers, which had been part of IT&GS, are now part of Aeronautics.
The realignment had no impact on our consolidated results of operations, financial position or cash flows. All prior year
segment amounts in this Form 10-K have been reclassified to reflect the segment organization. In addition, for all years
presented, interest income has been reclassified from segment Operating profit and Unallocated Corporate income (expense),
net to Other non-operating income (expense), net to conform to the 2007 consolidated Statement of Earnings presentation. In
2006, we reclassified $199 million, including $182 million from Unallocated Corporate expense, net and $17 million from
across the business segments. In 2005, we reclassified $143 million, including $132 million from Unallocated Corporate
expense, net and $11 million from across the business segments. The amounts from Unallocated Corporate expense, net were
primarily attributable to U.S. bank accounts and amounts from the business segments were attributable to interest from
foreign bank accounts. The impact on the individual segments’ operating results was not material. In addition, we reclassified
$16 million in expenses associated with the debt exchange in 2006 and $10 million related to a charge for the early
repayment of debt in 2005, from Unallocated Corporate expense, net to Other non-operating income (expense), net in the
respective years.
We now operate in four principal business segments: Aeronautics, Electronic Systems, IS&GS and Space Systems. We
organize our business segments based on the nature of the products and services offered. In the following tables of financial
data, the total of the operating results of these business segments is reconciled, as appropriate, to the corresponding
consolidated amount. With respect to the caption “Operating profit,” the reconciling item Unallocated Corporate expense, net
includes the FAS/CAS pension adjustment (see discussion below), costs for certain stock-based compensation programs
(including stock-based compensation costs for stock options and restricted stock as discussed in Note 11), the effects of items
not considered part of management’s evaluation of segment operating performance, Corporate costs not allocated to the
operating segments and other miscellaneous Corporate activities. Since the activities of the investees in which certain
business segments hold equity interests are closely aligned with the operations of those segments, the equity earnings (losses)
from those investees are included in the Operating profit of the respective segments. For financial data other than Operating
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