Lockheed Martin 2002 Annual Report Download - page 30

THIRTY-SEVEN
Interest expense for 2002 was $581 million, $119 million
lower than the comparable amount in 2001 mainly due to
reductions in our debt portfolio and the benefit from interest
rate swap agreements. Interest expense for 2001 was $700
million, $219 million lower than the amount for 2000 mainly
as a result of reductions in our debt portfolio.
Our effective tax rate was 7.7% for 2002, 67.7% for 2001
and 355.7% for 2000. The rate for each year was affected by
the tax impact from unusual items. Included in the unusual
items for 2002 was a $90 million tax benefit related to the set-
tlement of a research and development tax credit claim. In
addition, for years prior to 2002, the rates were increased by
non-deductible goodwill that was being amortized for finan-
cial accounting purposes. For 2000, the tax rate was further
increased by write-offs of non-deductible goodwill for busi-
nesses divested in that year. Adjusting for the impact of
unusual items and the adoption of FAS 142, our effective tax
rates would have been 31% for 2002, 32.6% for 2001 and
36.2% for 2000. For 2002 and 2001 these adjusted effective
tax rates were lower than the 35% statutory rate primarily due
to the lower tax rates on extraterritorial income. For 2000, the
adjusted rate was higher than the statutory rate due to adjust-
ments for revisions to prior year estimates.
For 2002, we reported earnings from continuing opera-
tions of $533 million ($1.18 per diluted share) compared to $43
million ($0.10 per diluted share) for 2001. In 2000, we reported
a loss from continuing operations of $477 million ($1.19 per
diluted share). These amounts included the after-tax effects of
unusual items which reduced earnings for 2002, 2001 and 2000
by $632 million, $651 million and $951 million, respectively.
The results for 2001 and 2000 included after-tax amortization
expense of $236 million and $268 million, respectively, for
goodwill and certain other intangibles that was not included in
2002 due to the adoption of FAS 142. Adjusting for the unusual
items and the adoption of FAS 142, earnings from continuing
operations would have been $1.2 billion in 2002, $930 million
in 2001, and $742 million in 2000.
Discontinued Operations
We reported losses from discontinued operations of $33 mil-
lion ($0.07 per diluted share) in 2002, $1.1 billion ($2.52 per
diluted share) in 2001, and $42 million ($0.10 per diluted
share) in 2000.
The businesses included in discontinued operations
reported operating losses of $33 million ($0.07 per diluted
share) in 2002, $62 million ($0.14 per diluted share) in 2001,
and $42 million ($0.10 per diluted share) in 2000.
Discontinued operations for 2002 includes losses incurred
for wind-down activities related to the global telecommunica-
tions services businesses, offset by the reversal of a reserve
associated with the sale of IMS. When recording the sale of
IMS in 2001, we established transaction-related reserves to
address various indemnity provisions in the sale agreement.
The risks associated with certain of these indemnity provisions
have been resolved and $39 million, net of taxes, was reversed
through discontinued operations in 2002.
Included in the 2001 loss from discontinued operations
was an unusual after-tax charge of $1.3 billion ($3.09 per
diluted share) related to our decision to exit the global
telecommunications services business. The 2001 results also
include an unusual after-tax gain of $309 million ($0.71 per
diluted share) from the third quarter 2001 sale of Lockheed
Martin IMS Corporation.
Net Earnings (Loss)
We reported net earnings of $500 million ($1.11 per diluted
share) in 2002, compared to net losses of $1 billion ($2.42 per
diluted share) in 2001 and $519 million ($1.29 per diluted
share) in 2000. These amounts included the after-tax effects of
unusual items which reduced earnings for 2002, 2001 and
2000 by $632 million, $1,678 million and $951 million,
respectively. The results for 2001 and 2000 included after-tax
amortization expense of $236 million and $268 million,
respectively, for goodwill and certain other intangibles that
was not included in 2002 due to the adoption of FAS 142.
Lockheed Martin Corporation