Lockheed Martin 2005 Annual Report Download - page 29

   
Lockheed฀Martin฀Corporation

We฀continuously฀strive฀to฀strengthen฀our฀portfolio฀of฀products฀
and฀services฀to฀meet฀the฀current฀and฀future฀needs฀of฀our฀cus-
tomers.฀ We฀ accomplish฀ this฀ not฀ only฀ internally,฀ through฀ our฀
independent฀ research฀ and฀ development฀ activities,฀ but฀ also฀
through฀acquisitions.฀We฀selectively฀pursue฀the฀acquisition฀of฀
businesses฀and฀investments฀that฀complement฀our฀current฀port-
folio฀and฀allow฀expansion฀into฀adjacent฀product฀lines฀or฀access฀
to฀ new฀ technologies.฀ We฀ have฀ made฀ a฀ number฀ of฀ such฀ niche฀
acquisitions฀of฀businesses฀during฀the฀past฀several฀years.฀Over฀
the฀last฀five฀years,฀we฀have฀completed฀10฀such฀acquisitions฀for฀
an฀ aggregate฀ purchase฀ price฀ of฀ approximately฀ $1.5฀ billion.฀
Conversely,฀we฀may฀also฀explore฀the฀sale฀of฀businesses,฀invest-
ments฀and฀surplus฀real฀estate.฀If฀we฀were฀to฀decide฀to฀sell฀any฀
such฀businesses฀or฀real฀estate,฀the฀resulting฀gains,฀if฀any,฀would฀
be฀ recorded฀ when฀ the฀ transactions฀ are฀ consummated฀ and฀
losses,฀if฀any,฀would฀be฀recorded฀when฀the฀value฀of฀the฀related฀
asset฀is฀determined฀to฀be฀impaired.

In฀ 2005,฀ we฀ completed฀ the฀ purchase฀ of฀ The฀ SYTEX฀ Group,฀
Inc.฀(SYTEX).฀The฀total฀purchase฀price,฀including฀transaction-
related฀costs,฀was฀approximately฀$480฀million.฀Approximately฀
$380฀million฀of฀the฀purchase฀price฀was฀paid฀in฀cash฀at฀closing,฀
with฀most฀of฀the฀ remainder฀payable฀ in฀2006.฀ The฀acquisition฀
was฀accounted฀ for฀under฀the฀ purchase฀method฀of฀accounting.฀
Purchase฀accounting฀adjustments฀were฀recorded฀by฀allocating฀
the฀purchase฀price฀to฀the฀assets฀acquired฀and฀liabilities฀assumed฀
based฀ on฀ their฀ estimated฀ fair฀ values,฀ and฀ included฀ recording฀
goodwill฀of฀$395฀million,฀of฀which฀$360฀million฀will฀be฀amor-
tized฀ for฀ tax฀ purposes.฀ The฀ acquisition฀ expands฀ the฀
Corporation’s฀information฀technology฀solutions฀and฀technical฀
support฀ services฀ businesses฀ with฀ the฀ DoD฀ and฀ other฀ federal฀
agencies.฀ The฀ operations฀ of฀ SYTEX฀ are฀ included฀ in฀ the฀
Information฀&฀Technology฀Services฀business฀segment.฀
In฀ 2005,฀we฀also฀completed฀the฀acquisitions฀of฀STASYS฀
Limited,฀a฀U.K.-based฀technology฀and฀consulting฀firm฀special-
izing฀in฀network฀communications฀and฀defense฀interoperability;฀
INSYS฀ Group฀ Limited,฀ a฀ U.K.-based฀ diversified฀ supplier฀ of฀
military฀ communications฀ systems,฀ weapons฀ systems฀ and฀
advanced฀analysis฀services;฀and฀Coherent฀Technologies,฀Inc.,฀
a฀U.S.-based฀supplier฀of฀high-performance,฀laser-based฀remote฀
sensing฀systems.฀The฀aggregate฀cash฀purchase฀price฀for฀these฀
฀
three฀ acquisitions฀ was฀ $180฀ million.฀ Purchase฀ accounting฀
adjustments฀included฀recording฀combined฀goodwill฀of฀$164฀mil-
lion.฀These฀acquisitions฀ were฀not฀material฀to฀our฀ consolidated฀
results฀of฀operations฀for฀2005.฀In฀January฀2006,฀we฀acquired฀
Aspen฀ Systems฀ Corporation,฀ a฀ U.S.-based฀ company฀ that฀
provides฀a฀ range฀of฀business฀ process฀and฀ technology฀solu-
tions฀ primarily฀ to฀ civil฀ agencies฀ of฀ the฀ U.S.฀ Government.฀
This฀acquisition฀ is฀not฀expected฀to฀have฀a฀material฀impact฀
on฀consolidated฀results฀of฀operations,฀financial฀position฀or฀
cash฀flows.฀

During฀2005฀and฀2004,฀we฀continued฀to฀execute฀the฀strategy฀to฀
monetize฀certain฀of฀our฀equity฀investments,฀as฀follows:
In฀January฀2005,฀we฀completed฀the฀sale฀of฀our฀25%฀inter-
est฀in฀Intelsat,฀Ltd.฀to฀a฀private฀equity฀firm฀for฀$18.75฀per฀share,฀
or฀ $752฀ million฀ in฀ total฀ proceeds.฀ The฀ transaction฀ resulted฀฀
in฀ the฀ recording฀ of฀ a฀ gain,฀ net฀ of฀ state฀ income฀ taxes,฀ of฀ $47฀
million฀in฀other฀income฀and฀expenses,฀and฀an฀increase฀in฀net฀
earnings฀of฀$31฀million฀($0.07฀per฀share).
In฀ June฀ 2005,฀ Inmarsat฀ plc฀ (Inmarsat),฀ a฀ company฀ in฀
which฀ we฀ held฀ a฀ 14%฀ interest,฀ completed฀ an฀ initial฀ public฀
offering฀ (IPO)฀ of฀ 150฀ million฀ of฀ its฀ ordinary฀ shares฀ on฀ the฀
London฀ Stock฀ Exchange.฀ The฀ IPO฀ had฀ the฀ effect฀ of฀ diluting฀
our฀ownership฀to฀8.9%฀and฀was฀the฀primary฀driver฀for฀our฀rec-
ognition฀of฀a฀ $42฀million฀deferred฀ gain฀ that฀ was฀ recorded฀ in฀
2003฀ related฀ to฀ this฀ investment.฀ In฀ October฀ 2005,฀ we฀ sold฀
approximately฀16฀million฀of฀our฀Inmarsat฀shares฀for฀$89฀mil-
lion,฀further฀reducing฀our฀ownership฀percentage฀to฀5.3%.฀These฀
transactions฀ resulted฀ in฀ the฀ recording฀ of฀ gains,฀ net฀ of฀ state฀
income฀ taxes,฀ totaling฀ $126฀ million฀ in฀ other฀ income฀ and฀
expenses,฀and฀an฀increase฀in฀net฀earnings฀of฀$82฀million฀($0.18฀
per฀share).฀At฀December฀31,฀2005,฀we฀held฀24฀million฀shares฀of฀
Inmarsat฀with฀a฀total฀market฀value฀of฀$146฀million.฀In฀January฀
2006,฀we฀sold฀an฀additional฀12฀million฀shares฀of฀Inmarsat฀for฀
$75฀million.฀The฀gain฀is฀expected฀to฀increase฀2006฀net฀earnings฀
by฀$47฀million฀($0.11฀per฀share).
In฀ the฀ fourth฀ quarter฀ of฀ 2005,฀ we฀ completed฀ the฀ sale฀ of฀
our฀ interest฀ in฀ NeuStar,฀ Inc.฀ The฀ transaction฀ resulted฀ in฀ the฀
recording฀of฀a฀gain,฀net฀of฀state฀income฀taxes,฀of฀$30฀million฀
in฀other฀income฀and฀expenses,฀and฀an฀increase฀in฀net฀earnings฀
of฀$19฀million฀($0.04฀per฀share).฀