Lockheed Martin 2002 Annual Report Download - page 54

SIXTY-ONE
Other Charges Related to Global Telecommunications
The charges recorded in the fourth quarter of 2001 also
included unusual charges, net of state income tax benefits, of
approximately $132 million related to commitments to and
impairment in the values of investments in satellite joint ven-
tures, primarily ACeS and Americom Asia-Pacific, LLC. In
addition, approximately $43 million was recorded for sever-
ance and facilities costs, and impairment of certain fixed
assets, associated with the business units that have been
realigned. On a combined basis, these unusual charges
reduced net earnings for 2001 by $117 million ($0.27 per
diluted share).
NOTE 3—PRIOR YEAR ACQUISITIONS AND OTHER
DIVESTITURE ACTIVITIES
Business Combination
In August 2000, the Corporation completed the second phase
of a two-phase transaction to acquire COMSAT Corporation
(COMSAT). The total amount recorded related to the second
phase of the transaction was approximately $1.3 billion based
on the Corporation’s issuance of approximately 27.5 million
shares of its common stock at a price of $49 per share. This
price per share represented the average of the price of
Lockheed Martin’s common stock a few days before and after
the announcement of the transaction in September 1998.
The total purchase price for COMSAT, including transac-
tion costs and amounts related to Lockheed Martin’s assump-
tion of COMSAT stock options, was approximately $2.6
billion, net of $76 million in cash balances acquired. The
COMSAT transaction was accounted for using the purchase
method of accounting, under which the purchase price was
allocated to assets acquired and liabilities assumed based on
their fair values. Included in these allocations were adjustments
totaling approximately $2.1 billion to record investments in
equity securities (i.e., Intelsat, Inmarsat and New Skies) at fair
value and goodwill.
Divestiture Activities
In November 2000, the Corporation sold its Aerospace
Electronics Systems (AES) businesses for $1.67 billion in
cash (the AES Transaction). The Corporation recorded an
unusual loss of $598 million related to the AES Transaction
which is included in other income and expenses. The loss
reduced net earnings for 2000 by $878 million ($2.18 per
diluted share).
In September 2000, the Corporation sold Lockheed
Martin Control Systems (Control Systems) for $510 million in
cash. This transaction resulted in the recognition of an unusual
gain, net of state income taxes, of $302 million which is
reflected in other income and expenses. The gain increased net
earnings for 2000 by $180 million ($0.45 per diluted share).
Also in September 2000, the Corporation sold approxi-
mately one-third of its interest in Inmarsat for $164 million.
The investment in Inmarsat was acquired as part of the merger
with COMSAT. As a result of the transaction, the Corpora-
tion’s interest in Inmarsat was reduced from approximately
22% to 14%. The sale of shares in Inmarsat did not impact the
Corporation’s results of operations for 2000.
NOTE 4—EARNINGS PER SHARE
Basic and diluted per share results for all periods presented
were computed based on the net earnings or loss for the
respective periods. The weighted average number of common
shares outstanding during the period was used in the calcula-
tion of basic earnings (loss) per share. In accordance with FAS
128, “Earnings Per Share,” the weighted average number of
common shares used in the calculation of diluted per share
amounts is adjusted for the dilutive effects of stock options
based on the treasury stock method only if an entity records
earnings from continuing operations (i.e., before discontinued
operations), as such adjustments would otherwise be antidilu-
tive to earnings per share from continuing operations.
Lockheed Martin Corporation