Lockheed Martin 2003 Annual Report Download - page 56

Lockheed Martin Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003
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tion received and the carrying value of its investment in
Inmarsat Ventures of $168 million. The Corporation would
expect to recognize the deferred gain at such time as it sells all
or a portion of its interest in the new company, Inmarsat
Holdings, Ltd.
In 2001, the Corporation decided not to make any further
investment in Astrolink International LLC (Astrolink), and
wrote off its 31% equity interest. As a result, the Corporation
recorded a charge, net of state income tax benefits, of $367 mil-
lion in other income and expenses to reflect the other than tem-
porary decline in the value of its investment in Astrolink. The
Corporation also recorded, net of state income tax benefits,
approximately $20 million of charges through cost of sales for
certain other costs related to Astrolink. On a combined basis,
these charges reduced net earnings for 2001 by approximately
$267 million ($0.62 per diluted share).
In January 2003, the Corporation entered into an agree-
ment with Astrolink’s other members to restructure Astrolink.
As part of the transaction, Liberty Satellite & Technology, a
subsidiary of Liberty Media Corporation, had an option to
acquire Astrolink’s assets and pursue a business plan to build a
one- or two-satellite system. On October 24, 2003, Liberty
Satellite & Technology notified the Corporation that they would
not exercise the option to acquire Astrolink’s assets and build
the satellite system. As a result, as part of the previously dis-
closed restructuring agreement, Astrolink’s procurement con-
tracts were terminated, and the Corporation acquired the
remaining ownership interests in Astrolink. The restructuring
also entailed the settlement of existing claims related to termi-
nation of Astrolink’s procurement contracts with its members,
certain of their affiliates and other vendors. Under these settle-
ments, the Corporation retained its work in process.
Completion of the restructuring did not have a material impact
on the Corporation’s financial position, results of operations or
cash flows.
In 2001, the Corporation recorded a charge, net of state
income tax benefits, of $361 million in other income and expenses
related to its investment in Loral Space & Communications,
Ltd. (Loral Space). The charge reduced net earnings by $235
million ($0.54 per diluted share). The decline in the value of the
investment was assessed to be other than temporary due to the
downward trend in the market price of Loral Space’s stock and
the potential impact of market and industry conditions on its
ability to execute its business plans. In July 2003, Loral Space
and certain of its subsidiaries filed voluntary petitions for reor-
ganization under Chapter 11 of the U.S. Bankruptcy Code. In
the third quarter of 2003, the Corporation sold its ownership
interest in Loral Space. The sale did not have a material impact
on the Corporation’s results of operations, financial position or
cash flows.
In 2001, the Corporation recorded charges, net of state
income tax benefits, of approximately $232 million in other
income and expenses related to commitments to and impair-
ment in the values of investments in certain satellite joint ven-
tures, primarily Asia Cellular Satellite System (ACeS) and
Americom Asia-Pacific, LLC (AAP). These charges reduced
net earnings by $153 million ($0.35 per diluted share).
NOTE 9 — DEBT
The Corporation’s long-term debt is primarily in the form
of publicly issued, fixed-rate and variable-rate notes and deben-
tures, summarized as follows:
Type (Maturity Dates) Range of
(In millions, except interest rate data) Interest Rates 2003 2002(a)
Floating rate convertible
debentures (2033) 0.93% $ 1,000 $—
Other debentures (2013-2036) 7.0–9.1% 3,388 4,198
Notes (2004-2022) 6.5–9.0% 1,778 3,099
Other obligations (2004-2017) 1.0–10.5% 42 260
6,208 7,557
Less current maturities (136) (1,365)
$ 6,072 $ 6,192
(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 August 2003, the Corporation completed a tender offer
to purchase for cash any and all of its outstanding 7.25% notes
due May 15, 2006 and 8.375% debentures due June 15, 2024.
A total principal amount of $720 million of the notes and
debentures were retired. The Corporation also repurchased
$251 million of long-term debt securities from other of its out-
standing debt issuances in the open market. The Corporation
recorded a loss, net of state income tax benefits, totaling $127
million in other income and expenses related to the early retire-
ment of the long-term debt repurchased under the tender offer
and in the open market. The loss reduced 2003 net earnings by
$83 million ($0.18 per diluted share).