Lockheed Martin 2002 Annual Report Download - page 56

SIXTY-THREE
2001, respectively, to provide launch services. The decrease
was partially due to an unusual charge, net of state income tax
benefits, of $173 million in 2002 which included amounts
related to the Corporation’s assessment of the probability of
termination of certain launches under contract, as well as
amounts related to advances for launches not under contract.
The portion of the charge related to advances for launches not
under contract was recorded due to an agreement which pro-
vides for reduced future payments from Lockheed Martin to
Khrunichev for launches, contingent on the receipt of new
orders as well as a minimum number of actual launches each
year, in lieu of the requirement to provide launch services. The
agreement was reached in light of the continuing overcapacity
in the launch vehicle market. The charge reduced 2002
net earnings by $112 million ($0.25 per diluted share).
In addition, commercial launch vehicle inventories included
amounts advanced to RD AMROSS, a joint venture between
Pratt & Whitney and NPO Energomash, of $61 million and
$58 million at December 31, 2002 and 2001, respectively, for
the development and purchase, subject to certain conditions,
of RD-180 booster engines used for Atlas launch vehicles.
Work in process inventories at December 31, 2002 and
2001 related to other long-term contracts and programs in
progress included approximately $13 million and $45 million,
respectively, of unamortized deferred costs for aircraft not
under contract related to the Corporation’s C-130J program.
Work in process inventories at December 31, 2002 and
2001 included general and administrative costs, including
independent research and development costs and bid and pro-
posal costs, of $502 million and $380 million, respectively.
General and administrative costs charged to cost of sales from
inventories for the years ended December 31, 2002, 2001 and
2000, including independent research and development costs
and bid and proposal costs, totaled $1.7 billion, $1.8 billion
and $2.0 billion, respectively.
Approximately $670 million of costs included in 2002
inventories, including $318 million advanced to Russian man-
ufacturers, are not expected to be recovered within 1 year.
NOTE 7—PROPERTY, PLANT AND EQUIPMENT
(In millions) 2002 2001
Land $ 102 $95
Buildings 3,197 3,117
Machinery and equipment 5,017 4,830
8,316 8,042
Less accumulated depreciation
and amortization (5,058) (5,051)
$ 3,258 $ 2,991
During the year ended December 31, 2002, the
Corporation recorded write-offs of fully depreciated property,
plant and equipment totaling $460 million.
NOTE 8—INVESTMENTS IN EQUITY SECURITIES
(In millions) 2002 2001
Equity method investments (ownership interest):
Intelsat, Ltd. (24%) $ 682 $ 1,206
Satellite ventures —47
Other 84 89
766 1,342
Cost method investments:
Inmarsat Ventures plc (14%) 168 270
New Skies Satellites, N.V. (14%) 56 117
Loral Space & Communications, Ltd. (11%) 3137
Other 16 18
243 542
$ 1,009 $ 1,884
Satellite ventures include the Corporation’s investments in
Space Imaging, LLC (Space Imaging), Astrolink, Americom
Asia-Pacific and ACeS. Other equity method investments
include United Space Alliance (USA) and other smaller joint
ventures in which the Corporation participates. The carrying val-
ues of the Corporation’s investments in New Skies and Loral
Space are marked to market.
In the fourth quarter of 2002, the Corporation recorded
unusual charges relating to its telecommunications invest-
ments, including Intelsat, Inmarsat and New Skies. The
charges were recorded due to the decline in the values of the
Lockheed Martin Corporation