1995 Annual Report - Lockheed Martin

Management's Discussion and Analysis of Financial Condition and Results of Operations Continuedhave liability at those sites where it has been designated a PRP, the Corporation anticipates that theactual burden for the costs of remediation will be shared with other liable PRPs. Generally, PRPs thatare ultimately determined to be responsible parties are strictly liable for site cleanups and usuallyagree among themselves to share, on an allocated basis, the costs and expenses for investigation andremediation of hazardous materials. Under existing environmental laws, however, responsible partiesare jointly and severally liable and, therefore, the Corporation is potentially liable for the full cost offunding such remediation. In the unlikely event that the Corporation were required to fund theentire cost of such remediation, the statutory framework provides that the Corporation maypursue rights of contribution from the other PRPs. Among the variables management must assessin evaluating costs associated with these sites are changing cost estimates, continually evolvinggovernment environmental standards and cost allowability issues. Therefore, the nature of theseenvironmental matters makes it extremely difficult to estimate the timing and amount of anyfuture costs that may be necessary for remedial measures. The Corporation currently is unable topredict the outcome of these matters, inasmuch as the actual costs of remedial actions have not beendetermined and the allocation of liabilities among parties that ultimately may be found liableremains uncertain.New Accounting StandardsIn 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial AccountingStandards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121 requires that certain long-lived assets to be held andused be reviewed for impairment whenever events or changes in circumstances indicate that thecarrying amount of an asset may not be recoverable. Additionally, SFAS No. 121 requires that certainlong-lived assets to be disposed of be reported at the lower of carrying amount or fair value less costto sell. The Corporation will adopt SFAS No. 121 in 1996, as required. Management anticipates thatthe impact of the adoption of this standard will not be material to the Corporation's consolidatedearnings and financial position.Also in 1995, the FASB adopted SFAS No. 123, "Accounting for Stock-Based Compensation."While SFAS No. 12 3 establishes financial accounting and reporting standards for stock-basedemployee compensation plans using a fair value method of accounting, it allows companies tocontinue to measure compensation cost for those plans using the intrinsic value method ofaccounting as prescribed in Accounting Principles Board (APB) Opinion No. 25, "Accounting forStock Issued to Employees." Should a company choose not to change its accounting method, it mustdisclose the pro forma effect on net earnings and earnings per share as if the fair value method hadbeen adopted. Currently, the Corporation intends to continue its present APB Opinion No. 25accounting treatment for stock-based compensation, and plans to adopt the disclosure provisions ofSFAS No. 123 beginning in 1996, as required.