Lockheed Martin 2002 Annual Report Download - page 58

SIXTY-FIVE
In the first quarter of 2001, the Corporation recorded an
unusual charge, net of state income tax benefits, of $100 mil-
lion in other income and expenses related to impairment of its
investment in Americom Asia-Pacific, LLC. The charge
reduced net earnings for the year ended December 31, 2001 by
$65 million ($0.15 per diluted share). The satellite operated by
Americom Asia-Pacific was placed in commercial operation
late in the fourth quarter of 2000. The decline in value of the
investment was assessed to be other than temporary as a result
of lower transponder pricing, lower than expected demand and
overall market conditions. The remaining value of the invest-
ment was written off in the fourth quarter of 2001 in connection
with the Corporation’s decision to exit the global telecommuni-
cations services business.
In the fourth quarter of 2000, the Corporation recorded an
unusual charge, net of state income tax benefits, of $117 mil-
lion related to impairment of its investment in ACeS. ACeS
operates a geostationary mobile satellite system serving
Southeast Asia which was placed in commercial operation in
the fourth quarter of 2000. The spacecraft experienced an
anomaly that reduced the overall capacity of the system by
about 35%. The decline in the value of the investment was
assessed to be other than temporary as a result of the reduced
business prospects due to this anomaly as well as overall mar-
ket conditions. The adjustment reduced net earnings by $77
million ($0.19 per diluted share).
On a combined basis, the Corporation’s investments in
Intelsat, Space Imaging, United Space Alliance and Americom
Asia-Pacific comprise the majority of the Corporation’s total
equity method investments at December 31, 2002 and equity
earnings (losses) recorded for the year then ended. Summarized
statement of operations information for these investees for
2002 on a combined basis was approximately as follows: net
sales—$2.9 billion; net earnings—$350 million. Summarized
balance sheet information as of December 31, 2002 on a
combined basis was approximately as follows: total assets—
$4.9 billion; total liabilities—$2.5 billion.
NOTE 9—DEBT
The Corporation’s long-term debt is primarily in the form of
publicly issued, fixed-rate notes and debentures, summarized
as follows:
Type (Maturity Dates)
(In millions, except Range of
interest rate data) Interest Rates 2002(a) 2001
Notes (2003–2022) 6.5–9.0% $ 3,099 $3,114
Debentures (2011–2036) 7.0–9.1% 4,198 4,198
ESOP obligations (2003–2004) 8.4% 82 132
Other obligations (2003–2016) 1.0–10.5% 178 67
7,557 7,511
Less current maturities (1,365) (89)
$ 6,192 $7,422
(a) Amounts exclude a $25 million adjustment to the fair value of
long-term debt relating to the Corporation’s interest rate swap
agreements which will not be settled in cash.
In 2003, the Corporation decided to issue irrevocable
redemption notices to the trustees for two issuances of callable
debentures totaling $450 million. One notice was for $300 mil-
lion of 7.875% debentures due on March 15, 2023, which were
callable on or after March 15, 2003. The second was for $150
million of 7.75% debentures due on April 15, 2023, which
were callable on or after April 15, 2003. The Corporation
expects to repay amounts due on March 15, 2003 and April 15,
2003, respectively. Therefore, the $450 million of debentures to
be redeemed has been included in current maturities of long-
term debt on the consolidated balance sheet at December 31,
2002. The Corporation expects to incur a loss on the early
repayment of the debt, net of state income tax benefits, of
approximately $16 million, or $10 million after tax.
In the fourth quarter of 2002, the Corporation recorded
$150 million of debt related to its guarantee of certain borrow-
ings of Space Imaging (see Note 8). The debt was recorded
due to the Corporation’s assessment regarding Space
Imaging’s inability to attract the necessary funding sufficient
to repay the borrowings, which are due on March 30, 2003.
The debt is included in other obligations above and has been
classified as current maturities of long-term debt in the
Corporation’s consolidated balance sheet.
Lockheed Martin Corporation