Lockheed Martin 2001 Annual Report Download - page 20

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Lockheed Martin Corporation
(Continued)
Other Divestiture Activities
As part of a strategic and organizational review begun
in 1999 the Corporation decided to evaluate the divestiture
of certain non-core business units.
In connection with this review and as described more
fully under the caption “Discontinued Operations” above,
the Corporation completed the sale of IMS on August 24,
2001. The resulting gain increased net earnings by $309
million ($0.71 per diluted share). Net sales for the seven
months ended July 31, 2001, the effective date of the
divestiture, related to the IMS businesses totaled approxi-
mately $355 million, excluding intercompany sales. This
transaction generated net cash proceeds of approximately
$560 million after related transaction costs and federal
and state income tax payments.
In January 2001, the Corporation completed the divesti-
ture of two business units in the environmental management
line of business. The impact of these divestitures was not
material to the Corporation’s 2001 consolidated results of
operations, cash flows or financial position due to the effects
of nonrecurring and unusual impairment losses recorded
in 2000 and 1999 related to these business units. Those
losses were included in other income and expenses as part
of other portfolio shaping activities in the respective years.
In November 2000, the Corporation sold its
Aerospace Electronics Systems (AES) businesses to BAE
SYSTEMS for $1.67 billion in cash (the AES Transaction).
The Corporation recorded a nonrecurring and unusual loss,
including state income taxes, of $598 million related to this
transaction which is included in other income and expenses.
The loss reduced net earnings for 2000 by $878 million
($2.18 per diluted share). Although the AES Transaction
resulted in the Corporation recording a pretax loss, it resulted
in a gain for tax purposes primarily because goodwill related
to the AES businesses was not included in the tax basis of
the net assets of AES. Accordingly, the Corporation was
required to make state and federal income tax payments
associated with the divestiture. The AES Transaction gener-
ated net cash proceeds of approximately $1.2 billion after
related transaction costs and federal and state income tax
payments. Net sales included in the year 2000 related to
the AES businesses totaled approximately $655 million,
excluding intercompany sales.
In September 2000, the Corporation sold Lockheed
Martin Control Systems (Control Systems) to BAE SYSTEMS
for $510 million in cash. This transaction resulted in the
recognition of a nonrecurring and unusual gain, net of state
income taxes, of $302 million which is reflected in other
income and expenses. The gain increased net earnings
for the year ended December 31, 2000 by $180 million
($0.45 per diluted share). Net sales for the first nine months
of 2000 related to Control Systems totaled approximately
$215 million, excluding intercompany sales. This transac-
tion generated net cash proceeds of $350 million after
related transaction costs and federal and state income
tax payments.
IMS was the final business unit specifically identified
for divestiture as part of the strategic and organizational
review initiated in 1999; however, on an ongoing basis,
the Corporation will continue to explore the sale of various
non-core businesses, passive equity investments and surplus
real estate. If the Corporation were to decide to sell any
such holdings or real estate, the resulting gains, if any,
would be recorded when the transactions are consummated
and losses, if any, would be recorded when they are prob-
able and estimable. The Corporation also continues to
review its businesses on an ongoing basis to identify ways
to improve organizational effectiveness and performance,
and to focus on its core business strategy.
In September 2000, the Corporation sold approxi-
mately one-third of its interest in Inmarsat for $164 million.
The investment in Inmarsat was acquired as part of the
merger with COMSAT. As a result of the transaction, the
Corporation’s interest in Inmarsat was reduced from approxi-
mately 22% to 14%. The sale of shares in Inmarsat did not
impact the Corporation’s results of operations. The transac-
tion generated net cash proceeds of approximately $115
million after transaction costs and federal and state income
tax payments.
In 1997, the Corporation repositioned 10 of its non-
core business units as a new independent company, L-3
Communications Holdings, Inc. (L-3). In 1999, the Corporation
sold its remaining interest in L-3 in two separate transac-
tions. On a combined basis, these two transactions resulted
in a nonrecurring and unusual gain, net of state income
taxes, of $155 million, and increased 1999 net earnings
by $101 million ($0.26 per diluted share).