Lockheed Martin 2001 Annual Report Download - page 19

The Corporation elected to early adopt, effective
January 1, 2001, Statement of Financial Accounting
Standards (SFAS) No. 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets.” The LMGT operating busi-
nesses identified for divestiture meet the requirements of
SFAS No. 144 for treatment as discontinued operations.
Accordingly, the results of operations of these businesses,
as well as the impairment and other charges related to the
decision to exit these businesses, have been classified as
discontinued operations in the Corporation’s consolidated
statement of operations for all periods presented, and have
been excluded from business segment information. Similarly,
the assets and liabilities of these businesses have been
separately identified in the consolidated balance sheet as
being held for sale. The Corporation expects to complete
the sale of these businesses by the end of 2002. Deprecia-
tion and amortization expense are no longer being recorded
with respect to the assets of the businesses in accordance
with the Statement. These businesses are recorded at esti-
mated fair value less cost to sell at December 31, 2001.
Changes in the estimated fair value will be recorded in
future periods as determined.
In addition, the Corporation completed the sale of
Lockheed Martin IMS Corporation (IMS), a wholly-owned
subsidiary, for $825 million in cash on August 24, 2001.
The transaction resulted in a gain, net of state income taxes,
of $476 million and increased net earnings by $309 million
($0.71 per diluted share). The results of IMS’ operations for
all periods presented, as well as the gain on the sale, have
been reclassified to discontinued operations in accordance
with SFAS No. 144. IMS’ assets and liabilities as of
December 31, 2000 have been reclassified as held for sale.
The results of operations and related gains or losses
associated with businesses divested prior to January 1,
2001, the effective date of the Corporation’s adoption of
SFAS No. 144, including the divestitures of the Corpora-
tion’s Aerospace Electronics Systems (AES) businesses and
Lockheed Martin Control Systems in 2000, have not been
reclassified to discontinued operations in accordance with
the Statement.
Other Charges Related to Global Telecommunications
The charges recorded in the fourth quarter of 2001
also included nonrecurring and unusual charges, net of
state income tax benefits, of approximately $132 million
related to commitments to and impairment in the values of
investments in satellite joint ventures, primarily ACeS and
Americom Asia-Pacific, LLC. The Corporation had previ-
ously recorded nonrecurring and unusual charges related to
other than temporary declines in the values of these invest-
ments as follows: in the first quarter of 2001, a charge, net
of state income tax benefits, of $100 million was recorded
related to Americom Asia-Pacific; and in the fourth quarter
of 2000, a charge, net of state income tax benefits, of
$117 million was recorded related to ACeS (see “Note 9—
Investments in Equity Securities” for additional discussion of
these charges).
In addition, the fourth quarter 2001 charges included
approximately $43 million for severance, facilities costs
and impairment of certain fixed assets associated with the
realigned business units. On a combined basis, these non-
recurring and unusual charges reduced net earnings for
2001 by $117 million ($0.27 per diluted share).
Write-off of Investment in Astrolink
The Corporation completed funding of its $400 million
investment commitment to Astrolink, a joint venture in which
the Corporation holds a 31% interest, in 2001. In October
2001, the Corporation made the decision and so advised
Astrolink that it did not plan to make any additional invest-
ment in the joint venture. In addition to its equity investment,
Lockheed Martin’s Space Systems segment had contracts
with Astrolink to manufacture four satellites and provide
related launch services, and LMGT had contracts to perform
system development and other services. Those contracts
were terminated due to Astrolink’s funding considerations.
As part of the $2.0 billion in charges recorded in the
fourth quarter of 2001, the Corporation recognized a non-
recurring and unusual charge, net of state income tax bene-
fits, of $367 million in other income and expenses which
reflects the other than temporary decline in value of its
investment in Astrolink based on the above circumstances.
In addition, charges of approximately $20 million were
recorded in cost of sales for certain other costs related to
Astrolink. On a combined basis, these charges reduced
net earnings for 2001 by approximately $267 million
($0.62 per diluted share). The Corporation continues to
monitor its business relationships related to Astrolink.
Lockheed Martin Corporation
December 31, 2001
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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