Lockheed Martin 2003 Annual Report Download - page 53

Lockheed Martin Corporation
51
NOTE 3 — DISCONTINUED OPERATIONS
In December 2001, the Corporation announced that it would
exit its global telecommunications services business as a result
of continuing overcapacity in the telecommunications industry
and deteriorating business and economic conditions in Latin
America. The Corporation recorded charges, net of state
income tax benefits, totaling approximately $1.4 billion in 2001
related to this action. The charges decreased net earnings by
approximately $1.3 billion ($3.09 per diluted share).
The charges related to certain global telecommunications
services businesses held for sale included, net of state income
tax benefits, approximately $1.2 billion for the impairment of
goodwill, and $170 million for the impairment of other long-
lived assets and exit costs associated with elimination of the
administrative infrastructure supporting the global telecommu-
nications businesses and investments. The charges were included
in discontinued operations in the statement of operations, and
the results of operations and cash flows of the businesses iden-
tified as held for sale were classified as discontinued operations
in the Corporation’s consolidated financial statements for all
periods presented and were excluded from business segment
information. The Corporation completed sales of all of the busi-
nesses classified as held for sale in 2002 with the exception of
Lockheed Martin Intersputnik (LMI). Those transactions did
not have a material impact on the Corporation’s consolidated
results of operations or financial position.
The Corporation is continuing to treat LMI as a discontinued
operation, as the Corporation is still holding and actively mar-
keting the business for sale, and there are interested potential
buyers. The operating results of LMI had no impact on the state-
ment of earnings for the year ended December 31, 2003, and
were not material for the years ended December 31, 2002 and
2001. LMI’s assets and liabilities represented less than 1% of
the Corporation’s consolidated assets and liabilities at
December 31, 2003 and 2002, and were included in the consol-
idated balance sheet in other current assets and other current
liabilities.
In addition, the Corporation completed the sale of
Lockheed Martin IMS Corporation (IMS), a wholly-owned
subsidiary, for $825 million in cash in August 2001. The trans-
action resulted in a gain, net of state income taxes, of $476 mil-
lion and increased net earnings by $309 million ($0.71 per
diluted share). The results of IMS’ operations, as well as the
gain on the sale, are classified as discontinued operations.
Net sales and loss before income taxes included in discon-
tinued operations were as follows:
(In millions) 2003 2002 2001
Net sales $20 $ 228 $ 803
Loss before income taxes:
Results of operations of
discontinued businesses $— $(19) $ (52)
Charges related to discontinued
businesses, net of IMS gain ——(970)
$— $(19) $(1,022)
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 associated
with certain of these indemnity provisions were resolved and
$39 million, net of taxes, was reversed through discontinued
operations in 2002.
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 respec-
tive periods. The weighted average number of common shares
outstanding during the period was used in the calculation 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. The dilutive effect of the convertible
debentures issued in 2003 (see Note 9) will not be included in
earnings per share calculations until such time as certain con-
tingency provisions that would permit conversion as outlined in
the underlying indenture agreement are satisfied.