Lockheed Martin 1998 Annual Report Download - page 39

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Lockheed Martin Corporation
stock redeemed ($1.0 billion). The weighted average number of
common shares outstanding during the year was used in this
calculation. Diluted earnings per share for 1998 and 1996 were
computed based on net earnings. For these calculations, the
weighted average number of common shares outstanding was
increased by the dilutive effect of stock options based on the treas-
ury stock method and, for 1996, by the assumed conversion of pre-
ferred stock. Diluted loss per share for 1997 was computed in the
same manner as basic loss per share, as the adjustments related to
the assumed conversion of the preferred stock (50.6 million com-
mon shares) and the related dividend requirement for the preferred
stock ($53 million) to the date of redemption, and the dilutive effect
of stock options (5.8 million common shares), were not made since
they would have had antidilutive effects.
The following table sets forth the computations of basic and
diluted earnings per share:
(In millions, except per share data) 1998 1997 1996
Net earnings applicable to common stock:
Net earnings $1,001 $ 1,300 $1,347
Dividends on preferred stock —(53) (60)
Deemed preferred stock dividend —(1,826) —
Net earnings (loss) applicable to common
stock for basic earnings per share 1,001 (579) 1,287
Dividends on preferred stock —— 60
Net earnings (loss) applicable to common
stock for diluted earnings per share $1,001 $ (579) $1,347
Average common shares outstanding:
Average number of common shares
outstanding for basic earnings per share 376.5 370.6 378.3
Assumed conversion of the Series A
preferred stock —— 57.9
Dilutive stock options—based on the
treasury stock method 4.6 — 6.4
Average number of common shares
outstanding for diluted earnings per share 381.1 370.6 442.6
Earnings (loss) per share:
Basic $ 2.66 $ (1.56) $ 3.40
Diluted $ 2.63 $ (1.56) $ 3.04
Note 7—Receivables
(In millions) 1998 1997
U.S. Government:
Amounts billed $ 987 $ 958
Unbilled costs and accrued profits 1,949 2,233
Commercial and foreign governments:
Amounts billed 635 675
Unbilled costs and accrued profits, primarily
related to commercial contracts 607 1,143
$ 4,178 $5,009
Approximately $345 million of the December 31, 1998 unbilled
costs and accrued profits are not expected to be billed within
one year.
Note 8—Inventories
(In millions) 1998 1997
Work in process, primarily related to long-term
contracts and programs in progress $ 6,198 $ 5,155
Less customer advances and progress payments (2,499) (2,805)
3,699 2,350
Other inventories 594 794
$ 4,293 $ 3,144
Included in 1998 and 1997 inventories were amounts advanced to
Russian manufacturers, Khrunichev State Research and Production
Space Center and RD AMROSS, a joint venture between Pratt &
Whitney and NPO Energomash, of approximately $840 million and
$490 million, respectively, for the manufacture of launch vehicles
and related launch services. Approximately $790 million of costs
included in 1998 inventories, which includes approximately $360
million advanced to the Russian manufacturers, are not expected to
be recovered within one year.
Included in 1998 inventories were capitalized costs related to
start-up activities of approximately $560 million that will be reflected
in the cumulative effect adjustment related to the Corporation’s
adoption, effective January 1, 1999, of SOP No. 98-5.
An analysis of general and administrative costs, including
research and development costs, included in work in process inven-
tories follows:
(In millions) 1998 1997 1996
Beginning of year $ 533 $ 460 $ 431
Incurred during the year 2,469 2,245 2,154
Charged to cost of sales during the year:
Research and development (819) (788) (784)
Other general and administrative (1,445) (1,384) (1,341)
End of year $ 738 $ 533 $ 460
In addition, included in cost of sales in 1998, 1997 and 1996
were general and administrative costs, including research and devel-
opment costs, of approximately $490 million, $539 million and
$574 million, respectively, incurred by commercial business units
or programs.
Note 9—Property, Plant and Equipment
(In millions) 1998 1997
Land $ 235 $ 285
Buildings 2,979 3,013
Machinery and equipment 5,459 5,346
8,673 8,644
Less accumulated depreciation and amortization (5,160) (4,975)
$ 3,513 $ 3,669