Lockheed Martin 1999 Annual Report Download - page 44

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Lockheed Martin Corporation
addition, the Corporation has incurred costs through the
end of 1999 which were anticipated in the 1995 consoli-
dation plan but had not met the requirements for accrual
earlier. These costs include relocation of personnel and pro-
grams, retraining, process re-engineering and certain capi-
tal expenditures, among others. As of December 31, 1999,
cumulative merger related and consolidation payments
were approximately $1.2 billion. Consistent with the origi-
nal 1995 consolidation plan, consolidation actions were
substantially completed by December 31, 1999.
Under existing U.S. Government regulations, certain
costs incurred for consolidation actions that can be demon-
strated to result in savings in excess of the cost to implement
can be deferred and amortized for government contracting
purposes and included as allowable costs in future pricing
of the Corporation’s products and services. Included in the
Consolidated Balance Sheet at December 31, 1999 is
approximately $375 million of deferred costs that will be
recognized in future sales and cost of sales.
Note 5—Earnings Per Share
Basic and diluted earnings per share for 1999 and 1998
are computed based on net earnings. For these years, the
weighted average number of common shares outstanding
during each year was used in the calculation of basic earn-
ings per share, and this number of shares was increased by
the effects of dilutive stock options based on the treasury
stock method in the calculation of diluted earnings per share.
Basic loss per share for 1997 was computed based on net
earnings, less the dividend requirement for preferred stock
to the date of redemption, and less the deemed preferred
stock dividend resulting from the November 1997 GE
Transaction representing the excess of the fair value of the
consideration transferred to GE (approximately $2.8 billion)
over the carrying value of the Lockheed Martin preferred
stock redeemed ($1.0 billion). The weighted average num-
ber of common shares outstanding during the year was
used in this calculation. The diluted loss per share for 1997
was computed in the same manner as basic loss per share,
as adjustments related to the assumed conversion of the
preferred stock (50.6 million common shares) and the
related dividend requirement for the preferred stock to the
date of redemption ($53 million), and the dilutive effect of
stock options (5.8 million common shares), were not made
since they would have had antidilutive effects.
The following table sets forth the computations of basic
and diluted earnings (loss) per share:
(In millions, except per share data) 1999 1998 1997
Net earnings (loss) applicable
to common stock:
Earnings before cumulative
effect of change in accounting $ 737 $1,001 $ 1,300
Cumulative effect of change in
accounting (355) — —
Net earnings 382 1,001 1,300
Dividends on preferred stock —— (53)
Deemed preferred stock dividend —— (1,826)
Net earnings (loss) applicable
to common stock for basic and
diluted computations $ 382 $1,001 $ (579)
Average common shares
outstanding:
Average number of common
shares outstanding for basic
computations 382.3 376.5 370.6
Dilutive stock options—based
on the treasury stock method 1.8 4.6 —
Average number of common
shares outstanding for diluted
computations 384.1 381.1 370.6
Earnings (loss) per share:
Basic:
Before cumulative effect of
change in accounting $1.93 $ 2.66 $ (1.56)
Cumulative effect of change
in accounting (.93) — —
$1.00 $ 2.66 $ (1.56)
Diluted:
Before cumulative effect of
change in accounting $1.92 $ 2.63 $ (1.56)
Cumulative effect of change
in accounting (.93) — —
$ .99 $ 2.63 $ (1.56)