1995 Annual Report - Lockheed Martin

Notes to Consolidated Financial Statements Continued74remediation expenditures referenced above arebeing allocated to the Corporation's operations asgeneral and administrative costs and, under existinggovernment regulations, these and other environmentalexpenditures related to U.S. Governmentbusiness, after deducting any recoveries from insuranceor other responsible parties, are allowable inestablishing the prices of the Corporation's productsand services. As a result, a substantial portion of theexpenditures will be reflected in the Corporation'ssales and cost of sales pursuant to U.S. Governmentagreement or regulation. The Corporation hasrecorded a liability for probable future environmentalcosts as discussed above, and has recorded anasset for probable future recovery of the portion ofthese costs in pricing of the Corporation's productsand services for U.S. Government business. Theportion that is expected to be allocated to commercialbusiness has been reflected in cost of sales. Therecorded amounts do not reflect the possible recoveryof portions of the environmental costs throughinsurance policy coverage or from other potentiallyresponsible parties to the contamination, which theCorporation is pursuing as required by agreementand U.S. Government regulation. Any such recoveries,when received, would reduce the Corporation'sliability as well as the allocated amounts to beincluded in the Corporation's U.S. Governmentsales and cost of sales.Legal proceedings - The Corporation or its subsidiariesare parties to or have property subject tolitigation and other proceedings, including mattersarising under provisions relating to the protection ofthe environment, in addition to those describedabove. In the opinion of management and counsel,the probability is remote that the outcome of litigationand proceedings will have a material adverseeffect on the results of the Corporation's operationsor its financial position.Letters of credit and other matters - TheCorporation has entered into standby letter of creditagreements and other arrangements with financialinstitutions primarily relating to the guaranteeof future performance on certain contracts. AtDecember 31, 1995, the Corporation had contingentliabilities on outstanding letters of credit, guarantees,and other arrangements aggregating approximately$560 million.At December 31, 1995, Lockheed MartinFinance Corporation (LMFC) had entered intoapproximately $140 million in interest rate swapagreements to reduce the impact of changes ininterest rates on its operations. The effect of theseagreements is that the aggregate of the carryingvalue of LMFC's financial instruments approximatestheir fair market value. LMFC is exposed to creditloss, to the extent of future interest rate differentials,in the event of nonperformance by the intermediariesto the interest rate swap agreements. TheCorporation does not anticipate nonperformanceby the intermediaries.Note 15 - Information on IndustrySegments and Major CustomersThe Corporation operates in four principal businesssegments: Space & Strategic Missiles, Aeronautics,Information & Technology Services, and Electronics.All other activities of the Corporation fall withinthe Energy, Materials and Other segment.Space & Strategic Missiles - Engaged in the design,development, engineering and production of civil,commercial and military space systems, includingspacecraft, space launch vehicles and supportingground systems and services; satellites; strategic fleetballistic missiles; tactical defense missiles; electronicsand instrumentation; remote sensing technology;space and ground-based strategic systems; andsurface and space-based information and communicationssystems.Aeronautics - Engaged in the design, development,engineering and production of fighter, bomber,special mission, airlift, antisubmarine warfare,reconnaissance, surveillance and high performanceaircraft; aircraft controls and subsystems; thrustreversers and shipboard vertical missile launchingsystems; and aircraft modification and maintenanceand logistics support for military and civiliancustomers.Information & Technology Services - Engaged inthe development and operation of large, complexinformation systems; designing, manufacturing andmarketing computer graphics products; developingand manufacturing high capacity data storage products;electronics contract manufacturing services;and providing advanced transportation systems andservices, and payload integration, astronaut trainingand flight operations support.Electronics - Engaged in the design, development,engineering and production of high-performanceelectronic systems for undersea, shipboard, landbasedand airborne applications. Major productlines include advanced technology missiles, nightnavigation and targeting systems for aircraft; submarineand surface ship combat systems; airborne,