Lockheed Martin 2013 Annual Report Download - page 53

amounts, and maturities of our indebtedness. We may at times refinance existing indebtedness, vary our mix of variable-rate
and fixed-rate debt, or seek alternative financing sources for our cash and operational needs.
Our stockholders’ equity increased from $39 million at December 31, 2012 to $4.9 billion at December 31, 2013. The
increase was due to the annual December 31 measurement adjustment related to our postretirement benefit plans of
$2.9 billion, primarily due to an increase in the discount rate, and the amortization of net actuarial gains and losses of
$1.0 billion in 2013; net earnings of $3.0 billion; and employee stock activity of $1.3 billion. These increases partially were
offset by dividends declared of $1.6 billion during the year and the repurchase of 16.0 million common shares for
$1.7 billion. As we repurchase our common shares, we reduce common stock for the $1 of par value of the shares
repurchased, with the excess purchase price over par value recorded as a reduction of additional paid-in capital. Due to the
volume of repurchases made under our share repurchase program, additional paid-in capital was reduced to zero, with the
remainder of the excess purchase price over par value of $434 million recorded as a reduction of retained earnings.
Contractual Commitments and Off-Balance Sheet Arrangements
At December 31, 2013, we had contractual commitments to repay debt, make payments under operating leases, settle
obligations related to agreements to purchase goods and services, and settle tax and other liabilities. Capital lease obligations
were not material. Payments due under these obligations and commitments are as follows (in millions):
Payments Due By Period
Total
Less Than
1 Year
Years
2 and 3
Years
4 and 5
After
5 Years
Long-term debt (a) $ 6,933 $ — $ 952 $ — $ 5,981
Interest payments 5,873 347 677 601 4,248
Other liabilities 2,656 248 443 377 1,588
Operating lease obligations 914 227 298 165 224
Purchase obligations:
Operating activities 28,208 13,838 10,505 3,162 703
Capital expenditures 197 107 88 2 —
Total contractual cash obligations $44,781 $14,767 $12,963 $4,307 $12,744
(a) Long-term debt includes scheduled principal payments only.
Amounts related to other liabilities represent the contractual obligations for certain long-term liabilities recorded as of
December 31, 2013. Such amounts mainly include expected payments under non-qualified pension plans, environmental
liabilities, and deferred compensation plans.
Purchase obligations related to operating activities include agreements and contracts that give the supplier recourse to us
for cancellation or nonperformance under the contract or contain terms that would subject us to liquidated damages. Such
agreements and contracts may, for example, be related to direct materials, obligations to subcontractors, and outsourcing
arrangements. Total purchase obligations for operating activities in the preceding table include approximately $26.4 billion
related to contractual commitments entered into as a result of contracts we have with our U.S. Government customers. The
U.S. Government generally would be required to pay us for any costs we incur relative to these commitments if they were to
terminate the related contracts “for convenience” under the Federal Acquisition Regulations (FAR), subject to available
funding. This also would be true in cases where we perform subcontract work for a prime contractor under a U.S.
Government contract. The termination for convenience language also may be included in contracts with foreign, state, and
local governments. We also have contracts with customers that do not include termination for convenience provisions,
including contracts with commercial customers.
Purchase obligations in the preceding table for capital expenditures generally include amounts for facilities and
equipment related to customer contracts.
We also may enter into industrial cooperation agreements, sometimes referred to as offset agreements, as a condition to
obtaining orders for our products and services from certain customers in foreign countries. These agreements are designed to
enhance the social and economic environment of the foreign country by requiring the contractor to promote investment in the
country. Offset agreements may be satisfied through activities that do not require us to use cash, including transferring
technology, providing manufacturing and other consulting support to in-country projects, and the purchase by third parties
(e.g.,our vendors) of supplies from in-country vendors. These agreements also may be satisfied through our use of cash for
such activities as purchasing supplies from in-country vendors, providing financial support for in-country projects,
establishment of ventures with local companies, and building or leasing facilities for in-country operations. We typically do
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