Lockheed Martin 2007 Annual Report Download - page 80

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We deferred recognition of a net gain of $67 million that otherwise would have been recognized on the sale of our
interests in LKEI and ILS, and have continued to include the related assets and liabilities on our Balance Sheet. We expect to
recognize the deferred net gain upon the expiration of our responsibility to refund the advances, which we currently believe
will be in 2008 based on the expected Proton launch schedule. Our ability to realize the deferred net gain is dependent upon
Khrunichev providing the contracted launch services or, in the event the launch services are not provided, ILS’ ability to
refund the advance. Through December 31, 2007, Proton launch services provided through ILS were provided according to
contract terms. Our Balance Sheet at December 31, 2007 included current assets related to LKEI and ILS totaling $132
million and current liabilities totaling $189 million, both of which will be reduced as the launch services are provided. The
assets relate primarily to advances we have made to Khrunichev for future launches, and the liabilities relate primarily to
advances we have received from customers for future launches.
Land
In the first quarter of 2007, we sold certain land in California for $36 million in cash. The transaction resulted in a gain,
net of state income taxes, of $25 million which we recorded in Other income (expense), net, and an increase in Net earnings
of $16 million ($0.04 per share).
In the second and third quarters of 2006, we sold certain land in California and Florida for combined proceeds of $76
million in cash. The transactions resulted in an aggregate gain, net of state income taxes, of $51 million which we recorded in
Other income (expense), net, and an increase in Net earnings of $33 million ($0.08 per share).
Investments
In the first quarter of 2006, we sold 21 million of our Inmarsat plc (Inmarsat) shares for $132 million, reducing our
ownership from 5.3% to less than 1%. As a result of this transaction, we recorded a gain, net of state income taxes, of $127
million in Other income (expense), net, which increased our Net earnings by $83 million ($0.19 per share). Also in the first
quarter of 2006, we received proceeds from the sale of the assets of Space Imaging, LLC. The transaction resulted in a gain,
net of state income taxes, of $23 million in Other income (expense), net, and increased Net earnings by $15 million ($0.03
per share).
In the fourth quarter of 2005, we completed the sale of our interest in NeuStar, Inc. The transaction resulted in a gain,
net of state income taxes, of $30 million in Other income (expense), net, and an increase in Net earnings of $19 million
($0.04 per share).
In the second quarter of 2005, Inmarsat completed an initial public offering (IPO) of 150 million of its shares on the
London Stock Exchange. The IPO had the effect of diluting our ownership from 14% to 8.9%. Inmarsat used a portion of the
proceeds to redeem certain remaining equity-related instruments held by shareholders, including us. As a result, we
recognized the $42 million deferred gain that was recorded in 2003 related to this investment. In October 2005, we sold
16 million of our Inmarsat shares for $89 million, further reducing our ownership percentage to 5.3%. These 2005
transactions resulted in gains, net of state income taxes, totaling $126 million in Other income (expense), net, and an increase
in Net earnings of $82 million ($0.18 per share).
In the first quarter of 2005, we completed the sale of our 25% interest in Intelsat, Ltd. to a private equity firm for $18.75
per share, or $752 million in total proceeds. The transaction resulted in a gain, net of state income taxes, of $47 million in
Other income (expense), net, and an increase in Net earnings of $31 million ($0.07 per share).
Other
In 2000, we sold our Aerospace Electronics Systems business. In connection with that sale, we established a transaction-
related reserve to address an indemnity provision included in the sale agreement. The risks associated with that indemnity
provision expired in 2006 and we reversed into earnings, net of state income taxes, $29 million in Other income (expense),
net. This resulted in an increase in Net earnings of $19 million ($0.04 per share).
United Launch Alliance
On December 1, 2006, we completed a transaction with The Boeing Company (Boeing) that resulted in the formation of
United Launch Alliance, LLC (ULA), a joint venture which combines the engineering, production, test and launch operations
associated with U.S. Government launches of our Atlas launch vehicles and Boeing’s Delta launch vehicles. Under the terms
of the joint venture master agreement, Atlas and Delta expendable launch vehicles will continue to be available as
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