LMT » Topics » Income Taxes

These excerpts taken from the LMT 8-K filed Jan 24, 2008.

Income Taxes

The Corporation’s effective income tax rates were 32.4% and 30.6% for the quarter and year ended December 31, 2007, and 30.5% and 29.6% for the comparable 2006 periods. These rates were lower than the 35% statutory rate for all periods due to tax benefits for US manufacturing activities, dividends related to employee stock ownership plans, and R&D tax credits. The 2007 tax rate was also reduced by an IRS audit settlement that decreased tax expense by $59 million and the 2006 tax rate was also reduced by extraterritorial tax benefits, including a $62 million refund claim for additional benefits in prior years.

The 1% increase in the 2007 tax rate when compared to 2006 is primarily the result of the elimination of the extraterritorial tax benefits in 2007, partially offset by additional tax benefits resulting from a statutory increase in US manufacturing benefits, new legislation that provided enhanced R&D tax credits, and the favorable closure of an IRS audit.

 

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Headquartered in Bethesda, Md., Lockheed Martin employs approximately 140,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.

###

 

NEWS MEDIA CONTACT:

 

Tom Jurkowsky, 301/897-6352

INVESTOR RELATIONS CONTACT:

 

Jerry Kircher, 301/897-6584

Website: www.lockheedmartin.com

Conference call: Lockheed Martin will webcast the earnings conference call (listen-only mode) at 3 p.m. E.T. on January 24, 2008. A live audio broadcast, including relevant charts, will be available on the Investor Relations page of the company’s website at: http://www.lockheedmartin.com/investor.

Income Taxes

The
Corporation’s effective income tax rates were 32.4% and 30.6% for the quarter and year ended December 31, 2007, and 30.5% and 29.6% for the comparable 2006 periods. These rates were lower than the 35% statutory rate for all periods due to
tax benefits for US manufacturing activities, dividends related to employee stock ownership plans, and R&D tax credits. The 2007 tax rate was also reduced by an IRS audit settlement that decreased tax expense by $59 million and the 2006 tax rate
was also reduced by extraterritorial tax benefits, including a $62 million refund claim for additional benefits in prior years.

The 1% increase in the 2007 tax rate
when compared to 2006 is primarily the result of the elimination of the extraterritorial tax benefits in 2007, partially offset by additional tax benefits resulting from a statutory increase in US manufacturing benefits, new legislation that
provided enhanced R&D tax credits, and the favorable closure of an IRS audit.

 


12








Headquartered in Bethesda, Md., Lockheed Martin employs approximately 140,000 people worldwide and is principally engaged in the
research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.

###

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NEWS MEDIA CONTACT:

 

Tom Jurkowsky, 301/897-6352

INVESTOR RELATIONS CONTACT:

 

Jerry Kircher, 301/897-6584

Website: www.lockheedmartin.com

FACE="ARIAL" SIZE="2">Conference call: Lockheed Martin will webcast the earnings conference call (listen-only mode) at 3 p.m. E.T. on January 24, 2008. A live audio broadcast, including relevant charts, will be available on the Investor
Relations page of the company’s website at: http://www.lockheedmartin.com/investor.

This excerpt taken from the LMT 10-Q filed Oct 26, 2007.

NOTE 4 – INCOME TAXES

We adopted FIN 48, Accounting for Uncertainty in Income Taxes, effective January 1, 2007. FIN 48 clarifies and sets forth consistent rules for accounting for uncertain income tax positions in accordance with FAS 109, Accounting for Income Taxes. The cumulative effect of applying the provisions of this interpretation was a $31 million noncash increase to our opening balance of retained earnings in 2007.

The liability for unrecognized tax benefits related to permanent and temporary tax adjustments, exclusive of interest, was $215 million at September 30, 2007 and $266 million at January 1, 2007, after the adjustment to the beginning balance of retained earnings. The net decrease in the liability of $51 million since the date of adoption primarily resulted from the following:

 

Balance at January 1, 2007

   $ 266  

Increase (decrease) related to tax positions in prior years:

  

Recognition of benefits due to closure of IRS exam

     (51 )

Unrecognized tax benefits arising from acquisition activity

     28  

Tax positions related to the current year

     54  

Decreases related to settlements with taxing authorities

     (82 )
        

Balance at September 30, 2007

   $ 215  
        

The closure of the Internal Revenue Service (IRS) examinations in the first quarter of 2007 included resolution of uncertain tax positions associated with the 2003 and 2004 audit years and claims we filed for additional extraterritorial income tax benefits for years prior to 2005. As a result, we recognized additional tax benefits and reduced our income tax expense in the first quarter of 2007 by $59 million ($0.14 per share), including related interest.

At September 30, 2007, the amount of unrecognized tax benefits for permanent tax adjustments that, if recognized, would affect the effective tax rate, was $157 million. Over the next year, we do not expect a significant increase or decrease in the unrecognized tax benefits recorded as of September 30, 2007. In the ordinary course of business, we may take new tax positions that could increase or decrease unrecognized tax benefits in future periods.

We record interest or penalties related to income taxes as a component of income tax expense in our financial statements. The amount of net interest recognized during the quarter and nine month periods ended September 30, 2007 and 2006, as well as the amount of interest accrued at September 30, 2007, was not material. No penalties were recorded in those periods.

We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various foreign jurisdictions. With few exceptions, the statute of limitations is no longer open for U.S. federal or non-U.S. income tax examinations for the years before 2000. As noted above, the IRS has completed examinations of our U.S. Federal income tax returns through December 31, 2004 and examinations of all claims associated with additional extraterritorial income tax benefits for years prior to 2005.

      9


Lockheed Martin Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

 

This excerpt taken from the LMT 8-K filed Oct 23, 2007.

Income Taxes

The Corporation’s effective income tax rates were 31.5% and 29.9% for the quarter and nine months ended September 30, 2007, and 22.8% and 29.2% for the comparable 2006 periods. The effective rates for all periods were lower than the statutory rate of 35% due to tax deductions for U.S. manufacturing activities and dividends related to our

 

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employee stock ownership plans. For 2007, income tax expense declined by $59 million due to the completion of an IRS audit in the first quarter of 2007. Additionally, tax benefits related to export sales, including a $62 million refund claim for additional benefits in prior years, reduced income tax expense in the third quarter of 2006.

 

11


Headquartered in Bethesda, Md., Lockheed Martin employs approximately 140,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.

###

 

NEWS MEDIA CONTACT:   Tom Jurkowsky, 301/897-6352
INVESTOR RELATIONS CONTACT:   Jerry Kircher, 301/897-6584

Website: www.lockheedmartin.com

Conference call: Lockheed Martin will webcast the earnings conference call (listen-only mode) at 11 a.m. E.D.T. on October 23, 2007. A live audio broadcast, including relevant charts, will be available on the Investor Relations page of the company’s website at: http://www.lockheedmartin.com/investor.

This excerpt taken from the LMT 10-Q filed Jul 26, 2007.

NOTE 4 – INCOME TAXES

We adopted FIN 48, Accounting for Uncertainty in Income Taxes, effective January 1, 2007. FIN 48 clarifies and sets forth consistent rules for accounting for uncertain income tax positions in accordance with FAS 109, Accounting for Income Taxes. The cumulative effect of applying the provisions of this interpretation was a $31 million noncash increase to our opening balance of retained earnings in 2007.

The liability for unrecognized tax benefits related to permanent and temporary tax adjustments, exclusive of interest, was $144 million at June 30, 2007 and $266 million at January 1, 2007, after the adjustment to the beginning balance of retained earnings. The net decrease in the liability of $122 million since the date of adoption primarily resulted from: (i) an $82 million decrease for settlements from closure in the first quarter of 2007 of an Internal Revenue Service (IRS) examination of Federal income tax returns for 2003 and 2004 and (ii) a $51 million decrease arising from the recognition of tax benefits from closure of the same examinations, as well as claims we filed for additional extraterritorial income (ETI) tax benefits for years prior to 2005. These decreases were partially offset by an increase for unrecognized tax benefits for the first six months of 2007.

The closure of the IRS examinations in the first quarter of 2007 included resolution of uncertain tax positions associated with the 2003 and 2004 audit years and the ETI refund claim. As a result, we recognized additional tax benefits and reduced our income tax expense in the first quarter of 2007 by $59 million ($0.14 per share), including related interest.

At June 30, 2007, the amount of unrecognized tax benefits for permanent tax adjustments that, if recognized, would affect the effective tax rate was $114 million. Over the next 12 months, we do not expect a significant increase or decrease in unrecognized tax benefits recorded as of June 30, 2007. In the ordinary course of business, we may take new tax positions that could increase or decrease unrecognized tax benefits in future periods.

We record interest or penalties related to income taxes as a component of income tax expense in our financial statements. The amount of net interest recognized during the quarter and six month periods ended June 30, 2007 and 2006, as well as the amount of interest accrued at June 30, 2007, was not material. No penalties were recorded in those periods.

We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various foreign jurisdictions. With few exceptions, the statute of limitations is no longer open for U.S. federal or non-U.S. income tax examinations for the years before 2000. As noted above, the IRS has completed examinations of our U.S. Federal income tax returns through December 31, 2004 and examinations of all claims associated with additional extraterritorial income tax benefits for years prior to 2005.

 

9


Table of Contents

Lockheed Martin Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

 

This excerpt taken from the LMT 8-K filed Jul 24, 2007.

Income Taxes

The Corporation’s effective income tax rates were 31.6% and 29.0% for the quarter and six months ended June 30, 2007, and 31.8% and 32.2% for the quarter and six months ended June 30, 2006. The effective rates for all periods were lower than the statutory rate of 35% due to tax deductions for U.S. manufacturing activities and dividends related to our employee stock ownership plan. For 2007, income tax expense was also reduced by $59 million due to the completion of an IRS audit in the first quarter of 2007. Additionally, income tax expense for 2006 was reduced by tax benefits related to export sales.

 

9


Headquartered in Bethesda, Md., Lockheed Martin employs approximately 140,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.

###

 

NEWS MEDIA CONTACT:

 

Tom Jurkowsky, 301/897-6352

INVESTOR RELATIONS CONTACT:

 

Jerry Kircher, 301/897-6584

Website: www.lockheedmartin.com

Conference call: Lockheed Martin will webcast the earnings conference call (listen-only mode) at 11 a.m. E.D.T. on July 24, 2007. A live audio broadcast, including relevant charts, will be available on the Investor Relations page of the company’s website at: http://www.lockheedmartin.com/investor.

This excerpt taken from the LMT 10-Q filed Apr 26, 2007.

NOTE 4 – INCOME TAXES

We adopted FIN 48, Accounting for Uncertainty in Income Taxes, effective January 1, 2007. FIN 48 clarifies and sets forth consistent rules for accounting for uncertain income tax positions in accordance with FAS 109, Accounting for Income Taxes. The cumulative effect of applying the provisions of this interpretation was a $31 million noncash increase to our opening balance of retained earnings in 2007.

The liability for unrecognized tax benefits related to permanent and temporary tax adjustments, exclusive of interest, was $138 million at March 31, 2007 and $266 million at January 1, 2007, after the adjustment to the beginning balance of retained earnings noted above. The decrease of $128 million since the date of adoption related primarily to: (i) an $82 million decrease in the liability for settlements arising from the closure in the first quarter of 2007 of an Internal Revenue Service (IRS) examination of Federal income tax returns for the years ended December 31, 2003 and 2004; and (ii) a $51 million decrease in the liability arising from the recognition of tax benefits from the closure of the same examinations, as well as claims we filed with the IRS for additional extraterritorial income (ETI) tax benefits, for years prior to 2005.

The closure of the examinations in the first quarter included resolution of uncertain tax positions associated with the 2003 and 2004 audit years and the ETI refund claim. As a result, we recognized additional tax benefits and reduced our first quarter 2007 income tax expense by $59 million ($0.14 per share), including related interest.

At March 31, 2007, the amount of unrecognized tax benefits for permanent tax adjustments that, if recognized, would affect the effective tax rate was $104 million. We do not expect a significant increase or decrease in unrecognized tax benefits over the next 12 months.

We record interest or penalties related to income taxes as a component of income tax expense in our financial statements. The amount of net interest recognized during the quarters ended March 31, 2007 and 2006, as well as the amount of interest accrued at March 31, 2007, was not material. No penalties were recorded in those periods.

We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various foreign jurisdictions. With few exceptions, the statute of limitations is no longer open for U.S. federal or non-U.S. income tax examinations for the years before 2000. As noted above, the IRS has completed examinations of our U.S. Federal income tax returns through December 31, 2004 and examinations of all claims associated with additional extraterritorial income tax benefits for years prior to 2005.

 

      9


Lockheed Martin Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

 

This excerpt taken from the LMT 8-K filed Apr 24, 2007.

Income Taxes

Our effective tax rates for the quarters ended March 31, 2007 and 2006 were 25.7% and 32.6%. Income tax expense was reduced by $59 million ($0.14 per share) due to the March 2007 completion of an IRS audit, which also reduced the effective tax rate for this quarter by 6.4%. Also reducing the effective tax rate were increased deductions in 2007 for US manufacturing activities and dividends related to our employee stock ownership plan. For the quarter ended March 31, 2006, the effective tax rate was lower than the statutory rate primarily due to tax benefits related to export sales and tax deductions for US manufacturing activities and dividends related to the employee stock ownership plan.

 

9


Headquartered in Bethesda, Md., Lockheed Martin employs approximately 140,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.

###

 

NEWS MEDIA CONTACT:    Tom Jurkowsky, 301/897-6352
INVESTOR RELATIONS CONTACT:    Jerry Kircher, 301/897-6584

Web site: www.lockheedmartin.com

Conference call: Lockheed Martin will webcast the earnings conference call (listen-only mode) at 11 a.m. E.D.T. on April 24, 2007. A live audio broadcast, including relevant charts, will be available on the Investor Relations page of the company’s web site at: http://www.lockheedmartin.com/investor.

This excerpt taken from the LMT 8-K filed Jan 25, 2007.

Income Taxes

The Corporation’s effective tax rate for the fourth quarter of 2006 was 30.5%. The effective tax rate for the year ended December 31, 2006 is 29.6% and reflects a $62 million ($0.14 per share) reduction in income tax expense related to claims filed with the Internal Revenue Service for additional export tax benefits for sales in previous years. This item reduced the effective tax rate for the year ended December 31, 2006 by 1.7%. A similar benefit was not recognized in our prior year results.

 

10


Headquartered in Bethesda, Md., Lockheed Martin employs approximately 140,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.

###

 

NEWS MEDIA CONTACT:

  Tom Jurkowsky, 301/897-6352

INVESTOR RELATIONS CONTACT:

  Jerry Kircher, 301/897-6584

Web site: www.lockheedmartin.com

Conference call: Lockheed Martin will webcast the earnings conference call (listen-only mode) at 3 p.m. E.T. on January 25, 2007. A live audio broadcast, including relevant charts, will be available on the Investor Relations page of the company’s web site at:

http://www.lockheedmartin.com/investor.

This excerpt taken from the LMT 8-K filed Oct 24, 2006.

Income Taxes

The Corporation’s effective tax rate for the third quarter of 2006 was 23% and reflects a $62 million ($0.14 per share) reduction in income tax expense related to claims filed with the Internal Revenue Service for additional export tax benefits for sales in previous years. This item reduced the effective tax rates for the quarter and nine months ended September 30, 2006 by 7.6% and 2.4%, respectively. A similar benefit was not recognized in our prior year results.

 

10


Headquartered in Bethesda, Md., Lockheed Martin employs approximately 140,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The Corporation reported 2005 sales of $37.2 billion.

###

 

NEWS MEDIA CONTACT:

  

Tom Jurkowsky, 301/897-6352

INVESTOR RELATIONS CONTACT:

  

Jerry Kircher, 301/897-6584

Web site: www.lockheedmartin.com

Conference call: Lockheed Martin will webcast the earnings conference call (listen-only mode) at 11 a.m. E.T. on October 24, 2006. A live audio broadcast, including relevant charts, will be available on the Investor Relations page of the company’s web site at: http://www.lockheedmartin.com/investor.

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