Lockheed Martin 1999 Annual Report Download - page 43

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999
amount recorded is adequate to provide for resolution of
these matters and to complete the dissolution process.
During the fourth quarter of 1997, the Corporation
recorded nonrecurring and unusual pretax charges, net
of state income tax benefits, totaling $457 million, which
reduced net earnings by $303 million. The charges were
identified in connection with the Corporation’s review,
which concluded in the fourth quarter, of non-strategic lines
of business, non-core investments and certain other assets.
Approximately $200 million of the pretax charges reflected
the estimated effects of exiting non-strategic lines of busi-
ness, including amounts related to the fixed price systems
development line of business in the area of children and
family services, and related to increases in estimated
exposures relative to the environmental remediation lines
of business initially identified in 1996 and for which initial
estimates of exposure were provided in the fourth quarter
of 1996. These increases in estimated exposures were
based on more current information, including deterioration
in a partner’s financial condition as evidenced by the part-
ner seeking protection under the bankruptcy laws. The
remaining charges reflected impairment in the values of
various non-core investments and certain other assets in
keeping with the Corporation’s continued focus on core
operations. These charges, in combination with the gain
recognized on the GE Transaction (see Note 3), decreased
loss per diluted share for 1997 by $.02.
During the fourth quarter of 1996, the Corporation
recorded nonrecurring pretax charges, net of state income
tax benefits, of $307 million, which decreased net earnings
by $209 million. Approximately one-half of the charges
reflected the estimated effects of terminating a business
relationship formed to provide environmental remediation
services to government and commercial customers world-
wide, and the initial estimated effects related to manage-
ment’s decision to exit a certain environmental remediation
line of business. Charges of approximately $85 million
were identified in connection with an evaluation of the
Corporation’s future strategic focus, and reflected impair-
ment in the values of non-core investments and certain
other assets which were other than temporary in nature.
The remaining charges of approximately $75 million
pertained to costs for facility closings and transfers of
programs related to the Corporation’s acquisition of Loral
Corporation in April 1996 (the Loral Transaction).
As of December 31, 1999, initiatives undertaken
as part of the 1997 and 1996 charges relating to the
Corporation’s reviews of non-core investments and certain
other assets which resulted in impairment in values of those
assets, facility closings and transfers of programs resulting
from the consummation of the Loral Transaction, and the
termination of a business relationship formed to provide
environmental remediation services, which in total rep-
resented approximately 75 percent of the amounts origi-
nally recorded, have been completed consistent with
the Corporation’s original plans and estimates. Actions
contemplated as part of the Corporation’s exit from a cer-
tain environmental remediation line of business and a fixed
price systems development line of business in the area of
children and family services have not been completed. In
1999, the Corporation recorded an additional charge of
approximately $40 million related to the exit from these
lines of business. During 1998 and 1997, the effects on
the Corporation’s net earnings of adjustments associated
with these charges were not material. The amounts recorded
in the Consolidated Balance Sheet at December 31, 1999
related to these actions are, in the opinion of management,
adequate to complete the remaining initiatives originally
contemplated in the 1997 and 1996 charges.
During 1995, the Corporation recorded pretax charges
of $690 million from merger related expenses in connec-
tion with the formation of Lockheed Martin and the related
corporate-wide consolidation plan. The charges repre-
sented the portion of the accrued costs and net realizable
value adjustments that were not probable of recovery. In