Lockheed Martin 2015 Annual Report Download - page 88

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition
date (in millions):
November 6, 2015
Cash and cash equivalents $75
Receivables 1,921
Inventories 1,817
Deferred income taxes, current 72
Other current assets 36
Property, plant and equipment 654
Goodwill 2,764
Intangible assets:
Customer programs 3,127
Trademarks 816
Other noncurrent assets 502
Deferred income taxes, noncurrent 214
Total identifiable assets and goodwill 11,998
Accounts payable (565)
Customer advances and amounts in excess of costs incurred (1,220)
Salaries, benefits, and payroll taxes (105)
Current portion of long-term debt (5)
Other current liabilities (347)
Long-term debt (11)
Customer contractual obligations (a) (480)
Other noncurrent liabilities (150)
Deferred income tax liabilities, noncurrent (a) (32)
Total liabilities assumed (2,915)
Total consideration $ 9,083
(a) Recorded in Other noncurrent liabilities on the consolidated balance sheet.
Intangible assets related to customer programs were recognized for each major helicopter and aftermarket program and
represent the aggregate value associated with the customer relationships, contracts, technology and tradenames underlying
the associated program. These intangible assets will be amortized over a weighted-average useful life of approximately
15 years in accordance with the underlying pattern of economic benefit as reflected by the future net cash inflows.
Customer contractual obligations represent liabilities on certain development programs where the expected costs exceed
the expected sales under contract. We measured these liabilities based on the price to transfer the obligation to a market
participant at the measurement date, assuming that the liability will remain outstanding in the marketplace. Based on the
estimated net cash outflows of the developmental programs plus a reasonable contracting profit margin required to transfer
the contracts to market participants, we recorded assumed liabilities of approximately $480 million. These liabilities will be
liquidated in accordance with the underlying economic pattern of the contractual obligations, as reflected by the estimated
future net cash outflows incurred on the associated contracts. Estimated liquidation of the contractual obligation is estimated
is as follows: $85 million in 2016, $90 million in 2017, $65 million in 2018, $60 million in 2019, $60 million in 2020 and
$110 million thereafter.
The fair values of the assets acquired and liabilities assumed were preliminarily determined using income, market and
cost valuation methodologies. The fair value measurements were estimated using significant inputs that are not observable in
the market and thus represent a Level 3 measurement as defined in Accounting Standards Codification (ASC) 820. The
income approach was primarily used to value the customer programs and trademarks intangible assets. The income approach
indicates value for an asset or liability based on the present value of cash flow projected to be generated over the remaining
economic life of the asset or liability being measured. Both the amount and the duration of the cash flows are considered
from a market participant perspective. Our estimates of market participant net cash flows considered historical and projected
pricing, remaining developmental effort, operational performance including company specific synergies, aftermarket
retention, product life cycles, material and labor pricing, and other relevant customer, contractual and market factors. Where
appropriate, the net cash flows are adjusted to reflect the uncertainties associated with the underlying assumptions, as well as
the risk profile of the net cash flows utilized in the valuation. The adjusted future cash flows are then discounted to present
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