Lockheed Martin 2001 Annual Report Download - page 30

Lockheed Martin Annual Report >>> 37
Lockheed Martin Corporation
(Continued)
by financing activities in 2000 from the cash provided by
financing activities in 1999 reflects the Corporation’s
issuance of $3.0 billion in long-term debt in 1999 and the
$1.0 billion increase in debt retirements in 2000 versus
1999, partially offset by a $405 million decrease in short-
term debt repayments and a $162 million decrease in
dividend payments. The increase in debt retirements was
primarily attributable to the Corporation’s completion of ten-
der offers for certain of its long-term debt securities during
the fourth quarter of 2000. The Corporation used $2.1 bil-
lion to consummate the tender offers, resulting in the early
extinguishment of $1.9 billion in long-term debt and an
extraordinary loss of $156 million, or $95 million after tax.
The Corporation paid dividends of $192 million in
2001 compared to $183 million in 2000 and $345
million in 1999.
Other
The Corporation receives advances on certain contracts
to finance inventories. At December 31, 2001, approxi-
mately $2.9 billion in advances and progress payments
related to work in process were received from customers and
recorded as a reduction to inventories in the Corporation’s
consolidated balance sheet. Also at December 31, 2001,
$566 million of customer advances and progress payments
were recorded in receivables as a reduction to unbilled costs
and accrued profits. Approximately $5.0 billion of customer
advances and amounts in excess of costs incurred, which
are typically from foreign governments and commercial
customers, were included in current liabilities at the end
of 2001.
The Corporation uses “free cash flow” as a measure to
evaluate its performance. The calculation of free cash flow
begins with net cash provided by operating activities from
the consolidated statement of cash flows. This amount is
then decreased by expenditures for property, plant and
equipment, and increased by proceeds from the disposal of
property, plant and equipment and by income taxes paid
related to divested businesses and investments. Free cash
flow was $2.0 billion for 2001 and $1.8 billion for 2000.
Capital Structure and Resources
Total debt, including short-term borrowings, decreased
by approximately $2.4 billion during 2001 from a balance
of $10.0 billion at December 31, 2000. The decrease was
primarily attributable to the pre-payment of $1.26 billion in
notes issued to GE mentioned previously, originally sched-
uled to mature in November 2002, payments of $825
million in scheduled debt maturities, the early redemption
of $200 million of 8.125% Monthly Income Preferred
Securities (MIPS) due in 2025, issued by a wholly-owned
subsidiary of COMSAT, and the early retirement of $117
million of 7.0% debentures due in 2011. The Corporation
recorded an extraordinary loss, net of $22 million in
income tax benefits, of $36 million associated with the
early retirement of the 7.0% debentures. The Corporation’s
long-term debt is primarily in the form of publicly issued,
fixed-rate notes and debentures. At December 31, 2001,
the Corporation held cash and cash equivalents of $912
million, a portion of which will be used to meet scheduled
long-term debt maturities in 2002.
Total stockholders’ equity was $6.4 billion at December
31, 2001, a decrease of $717 million from December 31,
2000. This decrease resulted primarily from the net loss of
$1.0 billion and the payment of dividends of $192 million.
The decline was partially offset by employee stock option
and ESOP activities of $394 million and other comprehen-
sive income of $127 million. Other comprehensive income
was largely due to the Corporation’s decision to write-down
its investment in Loral Space which resulted in a reclassifica-
tion of unrealized losses on Loral Space to the net loss for
2001. As a result of the above factors, the Corporation’s
total debt to capitalization ratio decreased from 58.2
percent at December 31, 2000 to 53.8 percent at
December 31, 2001.
At the end of 2001, the Corporation had in place a
$1.0 billion 1-year revolving credit facility and a $1.5 bil-
lion 5-year revolving credit facility (the Credit Facilities). No
borrowings were outstanding under the Credit Facilities at
December 31, 2001. Borrowings under the Credit Facilities
would be unsecured and bear interest at rates based, at the
Corporation’s option, on the Eurodollar rate or a bank Base
Rate (as defined). Each bank’s obligation to make loans
under the Credit Facilities is subject to, among other things,
compliance by the Corporation with various representa-
tions, warranties and covenants, including, but not limited
to, covenants limiting the ability of the Corporation and
certain of its subsidiaries to encumber their assets and a
covenant not to exceed a maximum leverage ratio. The
Credit Facilities replaced a $3.5 billion revolving credit
facility which expired in December 2001.