Lockheed Martin 2001 Annual Report Download - page 23

Lockheed Martin Corporation
December 31, 2001
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating profit increased two percent in 2000 over
1999 after excluding the effects of nonrecurring and
unusual items. Improved results in the Aeronautics, Systems
Integration and Corporate and Other segments more than
offset decreases in operating profit in the Space Systems
and Technology Services segments. Operating profit for
2000 compared to 1999 in the Aeronautics and Space
Systems segments was favorably impacted by the absence
in 2000 of negative adjustments recorded in 1999 on the
C-130J airlift aircraft and Titan IV launch vehicle programs,
respectively.
As further discussed in “Note 14—Post-Retirement Benefit
Plans,” operating profit in 2001 included approximately
$200 million in income related to the Corporation’s quali-
fied defined benefit plans and its retiree medical and life
insurance plans on a combined basis, a decrease of
approximately $85 million over the comparable 2000
amount. The decrease related primarily to the absence
in 2001 of a nonrecurring and unusual curtailment
gain associated with divestiture activities in 2000. The
Corporation’s earnings will continue to be affected posi-
tively or negatively by the level of income or expense
related to employee benefit plans. As detailed in Note 14,
various factors affect the calculation of the income or
expense, including the actual rate of return on plan assets
and the actuarial assumptions that are used to calculate
benefit obligations (e.g., the assumed discount rate,
expected future rates of return on plan assets, future pay
increases and the demographics of our workforce). Based
on actuarial assumptions and projected rates of return on
plan assets, the Corporation anticipates that its income
related to employee benefit plans will decline substantially
in 2002 and generate a net expense in 2003.
Interest expense for 2001 was $700 million, $219
million lower than the comparable balance in 2000 as
a result of reductions in the Corporation’s debt portfolio.
Interest expense for 2000 was $919 million, $110 million
higher than the comparable balance in 1999 primarily
as a result of increases in the Corporation’s debt portfolio
associated with the merger with COMSAT.
For 2001, the Corporation reported earnings from con-
tinuing operations before extraordinary items and cumula-
tive effect of change in accounting of $79 million ($0.18 per
diluted share), compared to a loss in 2000 of $382 million
($0.95 per diluted share). In 1999, the Corporation reported
earnings on a comparable basis of $729 million ($1.90
per diluted share). The reported results from continuing
operations include the impact of the nonrecurring and
unusual items presented above. Excluding such items,
earnings from continuing operations would have been
$694 million ($1.60 per diluted share) in 2001, $474 mil-
lion ($1.17 per diluted share) in 2000 and $567 million
($1.48 per diluted share) in 1999.
Discontinued Operations
The Corporation reported a loss from discontinued oper-
ations of $1.1 billion ($2.52 per diluted share) in 2001, a
loss of $42 million ($0.10 per diluted share) in 2000 and
income of $8 million ($0.02 per diluted share) in 1999.
Included in the 2001 loss from discontinued operations is
a nonrecurring and unusual after-tax charge of $1.3 billion
($3.09 per diluted share) related to the Corporation’s deci-
sion to exit the Global Telecommunications services busi-
ness. The 2001 results also include a nonrecurring and
unusual after-tax gain of $309 million ($0.71 per diluted
share) from the third quarter 2001 sale of Lockheed Martin
IMS Corporation.
The operating results for the businesses reported in dis-
continued operations were a loss of $62 million ($0.14 per
diluted share) in 2001, a loss of $42 million ($0.10 per
diluted share) in 2000 and income of $8 million ($0.02
per diluted share) in 1999.
Net (Loss) Earnings
Lockheed Martin Annual Report >>> 30
$0
Net Earnings (Loss)
-$1,200
-$200
$200
$400
$800
(In millions)
(a) (a)
-$800
(a)
’01 ’99’00
-$400
-$600
-$1,000
$600
a. Excluding the effects of the items presented in the preceding
table entitled “Effects of nonrecurring and unusual items,”
net earnings for 2001, 2000 and 1999 would have been
$632 million, $432 million and $575 million, respectively.