Lockheed Martin 2001 Annual Report Download - page 18

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Lockheed Martin Corporation
(Continued)
COMSAT transaction was accounted for using the purchase
method of accounting, under which the purchase price was
allocated to assets acquired and liabilities assumed based
on their fair values. Included in these allocations were
adjustments totaling approximately $2.1 billion to record
investments in equity securities at fair value and goodwill.
The LMGT businesses retained by the Corporation have
been realigned as follows:
•The Systems & Technology line of business and the
COMSAT General telecommunications business unit
have been realigned within the Space Systems segment.
•Enterprise Solutions-U.S., a commercial information
technology business, has been realigned within the
Technology Services segment.
The LMGT equity investments positioned for monetization
include Intelsat, Ltd. (Intelsat), Inmarsat Ventures plc (Inmarsat),
New Skies Satellites, N.V. (New Skies), ACeS International,
Ltd. (ACeS), Americom Asia-Pacific, LLC and Astrolink. These
investments, which had an aggregate carrying value of
approximately $1.6 billion at December 31, 2001, are now
reported as part of the Corporate and Other segment. The
investments in Intelsat, Inmarsat and New Skies are subject
to regulation by the Federal Communications Commission
(FCC). FCC decisions and policies have had, and may con-
tinue to have, a significant impact on these entities. The ORBIT
Act, enacted in March 2000, established deadlines for the
privatization and completion of initial public offerings by
these companies, as well as specific criteria for determining
whether the privatizations of those entities are pro-competi-
tive. If those criteria are not met, the FCC may limit access
by U.S. users to the satellite capacity of the privatized enti-
ties for certain services. Intelsat privatized in July 2001 and
Inmarsat privatized in 1999. Both have plans to access the
public capital markets. New Skies privatized in 1998 and
completed an initial public offering in 2000. If Intelsat and
Inmarsat were unable to satisfy the ORBIT Act criteria and are
denied U.S. market access, the value of the Corporation’s
investment in those entities could be adversely affected.
Following is a discussion which describes the compo-
nents of the $2.0 billion in charges based on their classifica-
tion in the Corporation’s consolidated financial statements.
Discontinued Operations
The $2.0 billion in charges recorded in the fourth quar-
ter of 2001 included charges, net of state income tax bene-
fits, of approximately $1.4 billion related to certain global
telecommunications services businesses held for sale and
exit costs associated with elimination of the administrative
infrastructure supporting the global telecommunications busi-
nesses and investments. These charges, which reduced net
earnings for the year by $1.3 billion ($3.09 per diluted
share) are included in discontinued operations in the
Corporation’s consolidated statement of operations. The
businesses held for sale are as follows:
•Satellite Services businesses—includes COMSAT
Mobile Communications, COMSAT World Systems
and Lockheed Martin Intersputnik. In the first quarter
of 2002, the Corporation completed the sale of
COMSAT Mobile Communications’ operations to
Telenor. The transaction is not expected to have a
material impact on the Corporation’s consolidated
results of operations in 2002.
•COMSAT-International (formerly Enterprise Solutions-
International)—provides telecommunications network serv-
ices in Latin America, primarily Argentina and Brazil.
Of the $1.4 billion of charges included in discontinued
operations, approximately $1.2 billion related to impair-
ment of goodwill in the Global Telecommunications seg-
ment. The goodwill was recorded in connection with the
Corporation’s acquisition of COMSAT as discussed above.
Approximately $170 million of the $1.4 billion related
to impairment of certain long-lived assets employed by
foreign businesses held for sale, primarily COMSAT-
International. The remainder of the charges related to
costs associated with infrastructure reductions, including
severance and facilities.