Lockheed Martin 2004 Annual Report Download - page 29

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Operating Net (Loss)
(Loss) (Loss) Earnings
(In millions, except per share data) Profit Earnings Per Share
YEAR ENDED DECEMBER 31, 2004
Charge for Pit 9 litigation $ (180) $(117) $(0.26)
Charge for early retirement of debt (154) (100) (0.22)
Gain on sale of interest in New Skies 91 59 0.13
Gain on sale of COMSAT General
business 28 4 0.01
Benefit from closure of an
IRS examination — 144 0.32
$ (215) $ (10) $(0.02)
YEAR ENDED DECEMBER 31, 2003
Charge for early retirement of debt $ (146) $ (96) $(0.21)
Charge related to exit from the
commercial mail sorting business (41) (27) (0.06)
Gain on partial reversal of Space
Imaging charge 19 13 0.03
Gain on sale of the commercial
IT business 15 8 0.02
$ (153) $(102) $(0.22)
YEAR ENDED DECEMBER 31, 2002
Write-down of telecommunications
investments $ (776) $(504) $(1.12)
Charge related to a Russian launch
services provider (173) (112) (0.25)
Write-down of investment in Space
Imaging and charge related to
recording of guarantee (163) (106) (0.23)
Benefit from R&D tax
credit settlement — 90 0.20
$(1,112) $(632) $(1.40)
Our operating profit for 2004 was $2.1 billion, an increase
of 3% compared to 2003. Our operating profit for 2003 was
$2.0 billion, an increase of 74% compared to 2002.
Interest expense for 2004 was $425 million, $62 million
lower than in 2003 mainly due to reductions in our debt portfo-
lio. Interest expense for 2003 was $487 million, $94 million
lower than the amount for 2002. This was primarily the result of
reductions in our debt portfolio and the favorable impact of
having issued $1.0 billion of floating rate convertible notes in
August 2003 to replace higher cost fixed rate debt.
Our effective tax rates were 23.9% for 2004, 31.3% for
2003 and 7.7% for 2002. A $144 million reduction in our
income tax expense primarily resulting from the closure of an
Internal Revenue Service (IRS) examination reduced our 2004
tax rate. A $90 million tax benefit related to settlement of a
research and development tax credit claim reduced our tax rate
for 2002. Tax benefits related to export sales, tax refund initia-
tives, and adjustments to true-up actual tax return liabilities
reduced our tax rate for each of the three years.
Recently enacted tax legislation has repealed the
Extraterritorial Income (ETI) exclusion relating to export sales.
Over a transition period beginning in 2005, the new tax rules
phase-out the ETI exclusion benefit and provide for a new tax
deduction in computing profits from the sale of products man-
ufactured in the United States. The tax benefit we realize from
the new legislation is expected to be substantially equivalent to
the benefit we realized under the repealed ETI exclusion.
Net earnings increased as compared to the prior year for
the third straight year. We reported net earnings of $1.3 billion
($2.83 per share) in 2004, compared to net earnings of $1.1 bil-
lion ($2.34 per share) in 2003. Net earnings for 2002 were
$500 million ($1.11 per share), and reflected losses from
discontinued operations of $33 million ($0.07 per share).
27
Lockheed Martin Corporation