Lockheed Martin 2003 Annual Report Download - page 55

Lockheed Martin Corporation
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launch vehicle inventories included amounts advanced to RD
AMROSS, a joint venture between Pratt & Whitney and NPO
Energomash, of $57 million and $61 million at December 31,
2003 and 2002, respectively, for the development and purchase,
subject to certain conditions, of RD-180 booster engines used
for Atlas launch vehicles.
In 2003, the Corporation recorded a charge, net of state
income tax benefits, of $41 million in cost of sales related to its
decision to exit the commercial mail sorting business. The
charge, which related primarily to the impairment of inventories
of the business, reduced net earnings by $27 million ($0.06 per
diluted share).
Work in process inventories at December 31, 2003 and
2002 included general and administrative costs, including inde-
pendent research and development costs and bid and proposal
costs, of $381 million and $502 million, respectively. General
and administrative costs charged to cost of sales from invento-
ries for the years ended December 31, 2003, 2002 and 2001,
including independent research and development costs and bid
and proposal costs, totaled $2.0 billion, $1.7 billion and $1.8
billion, respectively.
Approximately $534 million of costs included in 2003
inventories, including $166 million advanced to Khrunichev,
are not expected to be recovered within 1 year.
NOTE 7 — PROPERTY, PLANT AND EQUIPMENT
(In millions) 2003 2002
Land $ 106 $ 102
Buildings 3,365 3,197
Machinery and equipment 5,198 5,017
8,669 8,316
Less accumulated depreciation and amortization (5,180) (5,058)
$ 3,489 $ 3,258
During the year ended December 31, 2003, the
Corporation recorded write-offs of fully depreciated property,
plant and equipment totaling approximately $330 million.
NOTE 8 — INVESTMENTS IN EQUITY SECURITIES
(In millions) 2003 2002
Equity method investments (ownership interest):
Intelsat, Ltd. (25%) $ 729 $ 682
Other 94 84
823 766
Cost method investments (ownership interest):
New Skies Satellites, N.V. (16%) 133 56
Inmarsat Holdings, Ltd. (14%) 96 —
Inmarsat Ventures, Ltd. (14%) —168
Other 819
237 243
$ 1,060 $ 1,009
Other equity method investments include United Space
Alliance, LLC (50% ownership interest) and other smaller joint
ventures in which the Corporation participates. The carrying
value of the Corporation’s investment in New Skies is marked
to market.
In 2002, the Corporation recorded charges relating to its
telecommunications investments, including Intelsat, Ltd.
(Intelsat), Inmarsat Ventures, Ltd. (Inmarsat Ventures) and New
Skies Satellites, N.V. (New Skies). The charges were recorded
as a result of the decline in the values of the investments which
the Corporation assessed as being other than temporary, prima-
rily due to unfavorable trends in the satellite services and
telecommunications industries that were not expected to be
resolved in the near term. The charges reduced operating profit
(earnings from continuing operations before interest and taxes),
net earnings and earnings per diluted share for the year ended
December 31, 2002 as follows:
Operating Net Earnings per
(In millions, except per share data) Profit Earnings Diluted Share
Intelsat $ (572) $ (371) $ (0.82)
Inmarsat Ventures (101) (66) (0.15)
New Skies (103) (67) (0.15)
$(776) $ (504) $ (1.12)
In December 2003, Inmarsat Ventures was acquired by a
consortium of private equity firms in a leveraged buyout trans-
action. In exchange for its interest, the Corporation received
cash of $114 million and a 14% ownership interest in the new
Inmarsat holding company valued at $96 million. The
Corporation recorded a deferred gain of $42 million from the
transaction, representing the difference between the considera-