Lockheed Martin 2002 Annual Report Download - page 53

SIXTY
Lockheed Martin Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002
the year by $1.3 billion ($3.09 per diluted share) are included
in discontinued operations in the Corporation’s statement of
operations in accordance with FAS 144. The status of the busi-
nesses classified held for sale is as follows:
•Satellite Services businesses—In 2002, the Corporation
completed the sale of COMSAT Mobile Communications
and COMSAT World Systems. These transactions did not
have a material impact on the Corporation’s consolidated
results of operations or financial position.
The Corporation reached an agreement to sell Lockheed
Martin Intersputnik (LMI) in the third quarter of 2002.
Consummation of this transaction is subject to regulatory
approvals and other conditions, including a requirement that
the Corporation move the LMI satellite to another orbital
slot. The transaction is not expected to have a material impact
on the Corporation’s consolidated results of operations or
financial position. LMI is recorded at estimated fair value less
cost to sell at December 31, 2002. Changes in the estimated
fair value will be recorded in the future if appropriate.
•COMSAT International—The Corporation completed the sale
of an 81% ownership interest in COMSAT International in
October 2002. The transaction did not have a material impact
on the Corporation’s consolidated results of operations or
financial position.
Of the $1.4 billion of charges included in discontinued
operations, approximately $1.2 billion related to impairment
of goodwill. The goodwill was recorded in connection with
the Corporation’s acquisition of COMSAT as discussed in
Note 3. The write-down of the goodwill was based on the rela-
tionship of its carrying value to the Corporation’s estimated
realizable value. Approximately $170 million of the $1.4 billion
related to impairment of certain long-lived assets employed
by foreign businesses held for sale, primarily COMSAT
International. The remainder of the charges included in discon-
tinued operations is related to costs associated with infrastructure
reductions, including severance and facilities.
In addition, the Corporation completed the sale of
Lockheed Martin IMS Corporation (IMS), a wholly-owned
subsidiary, for $825 million in cash on August 24, 2001. The
transaction resulted in a gain, net of state income taxes, of
$476 million and increased net earnings by $309 million
($0.71 per diluted share). The results of IMS’s operations for
all periods presented, as well as the gain on the sale, are clas-
sified as discontinued operations.
Net sales and loss before income taxes related to the dis-
continued businesses were as follows:
(In millions) 2002 2001 2000
Net sales $228 $ 803 $788
Loss before income taxes:
Results of operations of
discontinued businesses $(19) $(52) $ (46)
Charges related to discontinued
businesses, net of IMS gain —(970) —
$(19) $(1,022) $ (46)
The Corporation reported a net loss from discontinued
operations of $33 million ($0.07 per diluted share) in 2002.
This amount included losses incurred to complete wind-down
activities related to the global telecommunications services
businesses, offset by the reversal of a reserve associated with
the sale of IMS. When recording the sale of IMS in 2001, the
Corporation established transaction reserves to address various
indemnity provisions in the sale agreement. The risks associ-
ated with certain of these indemnity provisions have been
resolved and $39 million, net of taxes, was reversed through
discontinued operations in 2002.
The major classes of assets and liabilities of the discontin-
ued businesses classified as held for sale and included in the
consolidated balance sheet were as follows:
(In millions) 2002 2001
ASSETS
Receivables $1 $81
Deferred income taxes —149
Property, plant and equipment, net 174 277
Goodwill —84
Other assets 35 47
$210 $638
LIABILITIES
Accounts payable $1 $28
Customer advances 66 75
Other liabilities 55 284
$122 $387