Lockheed Martin 2005 Annual Report Download - page 56

Download and view the complete annual report

Please find page 56 of the 2005 Lockheed Martin annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 82

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82

   
Lockheed฀Martin฀Corporation
NOTES฀TO฀CONSOLIDATED฀FINANCIAL฀STATEMENTS
December฀31,฀2005
related฀ to฀ a฀ covenant฀ not฀ to฀ compete฀ that฀ will฀ be฀ amortized฀
over฀five฀years,฀an฀intangible฀asset฀of฀approximately฀$55฀mil-
lion฀ related฀ to฀ contracts฀ and฀ customer฀ relationships฀ acquired฀
that฀ will฀ be฀ amortized฀ over฀ seven฀ years,฀ and฀ goodwill฀ of฀
approximately฀ $460฀million฀which฀is฀neither฀amortizable฀nor฀
tax฀ deductible.฀ The฀ divestiture฀ of฀ the฀ Corporation’s฀ commer-
cial฀IT฀business฀resulted฀in฀a฀gain,฀net฀of฀state฀income฀taxes,฀of฀
$15฀million฀which฀was฀recorded฀in฀other฀income฀and฀expenses.฀
The฀ gain฀ increased฀ 2003฀ net฀ earnings฀ by฀ approximately฀ $8฀
million฀($0.02฀per฀share).
In฀ 2005,฀ Lockheed฀ Martin฀ and฀ Boeing฀ entered฀ into฀ an฀
agreement฀ to฀ create฀ a฀ joint฀ venture฀ that฀ would฀ combine฀ the฀
production,฀engineering,฀test฀and฀launch฀operations฀associated฀
with฀ U.S.฀ Government฀ launches฀ of฀ the฀ Corporation’s฀ Atlas฀
launch฀vehicles฀and฀Boeing’s฀Delta฀launch฀vehicles.฀The฀joint฀
venture,฀named฀United฀Launch฀Alliance,฀LLC฀(ULA),฀is฀struc-
tured฀as฀a฀50-50฀joint฀venture฀and฀would฀be฀accounted฀for฀as฀
an฀ equity฀ investment.฀ Under฀ the฀ terms฀ of฀ the฀ joint฀ venture,฀
Atlas฀and฀Delta฀expendable฀launch฀vehicles฀would฀continue฀to฀
be฀available฀as฀alternatives฀on฀individual฀launch฀missions.฀The฀
agreement฀also฀stipulates฀that,฀upon฀closing฀of฀the฀transaction,฀
Lockheed฀Martin฀ and฀Boeing฀will฀ dismiss฀ all฀ claims฀ against฀
each฀other฀in฀the฀pending฀civil฀litigation฀related฀to฀a฀previous฀
competition฀for฀launches฀under฀the฀Air฀Force฀EELV฀program฀
(see฀Note฀15฀for฀a฀discussion฀of฀that฀litigation).
The฀ closing฀ of฀ the฀ ULA฀ transaction฀ is฀ subject฀ to฀ condi-
tions฀to฀closing,฀including฀government฀and฀regulatory฀approv-
als฀ and฀ agreements฀ in฀ the฀ United฀ States฀ and฀ internationally.฀
On฀ August฀ 9,฀ 2005,฀ the฀ European฀ Commission฀ determined฀
that฀ ULA฀ was฀compatible฀with฀ European฀ Union฀merger฀con-
trol฀ regulation.฀ On฀ October฀ 24,฀ 2005,฀ the฀ Federal฀ Trade฀
Commission฀ (FTC)฀ requested฀ additional฀ information฀ from฀
Lockheed฀ Martin฀ and฀ Boeing฀ related฀ to฀ ULA฀ in฀ response฀ to฀
the฀ pre-merger฀ notice฀ under฀ the฀ Hart-Scott-Rodino฀ Antitrust฀
Improvements฀ Act฀ of฀ 1976฀ (HSR)฀ submitted฀ by฀ the฀ parties.฀
The฀FTC’s฀“second฀request”฀extends฀the฀period฀the฀FTC฀is฀per-
mitted฀to฀review฀the฀transaction฀under฀the฀HSR฀Act.฀The฀par-
ties฀ currently฀ plan฀ to฀ close฀ the฀ ULA฀ transaction฀ as฀ soon฀ as฀
practicable฀following฀satisfaction฀of฀all฀the฀closing฀conditions.฀
The฀ Corporation฀ does฀ not฀ expect฀ that฀ the฀ formation฀ of฀ ULA฀
will฀ have฀ a฀ significant฀ impact฀ on฀ the฀ Corporation’s฀ results฀ of฀
operations฀or฀financial฀position฀for฀2006.฀If฀the฀conditions฀to฀
closing฀are฀ not฀satisfied฀and฀the฀ ULA฀ transaction฀is฀not฀con-
summated฀ by฀ March฀ 31,฀ 2006,฀ either฀ Boeing฀ or฀ Lockheed฀
Martin฀may฀terminate฀the฀joint฀venture฀agreement.
On฀ February฀ 17,฀ 2006,฀ the฀ U.S.฀ District฀ Court฀ for฀ the฀
Central฀ District฀ of฀ California฀ dismissed฀ a฀ lawsuit฀ filed฀ in฀
October฀2005,฀by฀Space฀Exploration฀Technologies฀Corporation฀
(SpaceX)฀against฀Lockheed฀Martin฀and฀Boeing.฀ The฀SpaceX฀
complaint฀alleged฀that฀Lockheed฀Martin฀and฀Boeing฀violated฀
various฀provisions฀of฀federal฀and฀California฀antitrust฀laws,฀the฀
Racketeering฀ Influenced฀ and฀ Corrupt฀ Organizations฀ Act฀ and฀
California฀unfair฀competition฀laws฀in฀connection฀with฀the฀Air฀
Force฀Evolved฀Expendable฀Launch฀Vehicle฀(EELV)฀program฀and฀
the฀formation฀of฀the฀United฀Launch฀Alliance฀joint฀venture.฀In฀
its฀order,฀the฀district฀court฀concluded฀that฀SpaceX฀failed฀to฀allege฀
an฀ injury-in-fact,฀ because฀ SpaceX฀ does฀ not฀ presently฀ have฀ a฀
launch฀vehicle฀capable฀of฀meeting฀Air฀Force฀EELV฀requirements.฀
The฀court฀gave฀SpaceX฀leave฀to฀file฀an฀amended฀complaint.

Basic฀ and฀ diluted฀ per฀ share฀ results฀ for฀ all฀ periods฀ presented฀
were฀ computed฀ based฀ on฀ the฀ net฀ earnings฀ for฀ the฀ respective฀
periods.฀The฀weighted฀average฀number฀of฀common฀shares฀out-
standing฀during฀the฀period฀was฀used฀in฀the฀calculation฀of฀basic฀
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.
Unless฀ otherwise฀ noted,฀ all฀ per฀ share฀ amounts฀ cited฀ in฀
these฀ financial฀ statements฀ are฀ presented฀ on฀ a฀ “per฀ diluted฀
share”฀basis.
The฀ following฀ table฀ sets฀ forth฀ the฀ computations฀ of฀ basic฀
and฀diluted฀earnings฀per฀share:
(In฀millions,฀except฀per฀share฀data)  2004 2003

   $1,266 $1,053

 
฀ Average฀number฀of฀common฀shares฀฀
฀ ฀ outstanding฀for฀basic฀฀
฀ ฀ computations  443.1 446.5
฀ Dilutive฀stock฀options ฀  4.0 3.5
฀ Average฀number฀of฀common฀shares฀฀
฀ ฀ outstanding฀for฀diluted฀฀
฀ ฀ computations  447.1 450.0

฀ Basic   $฀ 2.86 $฀ 2.36
฀ Diluted   $฀ 2.83 $฀ 2.34