Lockheed Martin 2005 Annual Report Download - page 58

Download and view the complete annual report

Please find page 58 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

   

(In฀millions)  2004
Equity฀method฀investments฀(ownership฀interest฀฀
฀ at฀December฀31,฀2005):
฀ ฀ Intelsat,฀Ltd.   $703
฀ ฀ Other  57
 760
Other฀investments฀(ownership฀interest฀฀
฀ at฀December฀31,฀2005):
฀ ฀ Inmarsat฀plc฀(5.3%)  46
฀ ฀ Other 6
 52
 $812
Other฀ equity฀ method฀ investments฀ include฀ United฀ Space฀
Alliance,฀ LLC฀ (50%฀ ownership฀ interest)฀ and฀ other฀ smaller฀
joint฀ventures฀in฀which฀the฀Corporation฀participates.฀
In฀2003,฀Inmarsat฀Ventures,฀Ltd.฀was฀acquired฀by฀a฀con-
sortium฀of฀private฀equity฀firms฀in฀a฀leveraged฀buyout฀transac-
tion.฀In฀exchange฀for฀its฀interest,฀the฀Corporation฀received฀cash฀
of฀ $114฀ million฀ and฀ a฀ 14%฀ ownership฀ interest฀ in฀ the฀ new฀
Inmarsat฀ holding฀ company,฀ Inmarsat฀ Group฀ Holdings,฀ Ltd.,฀
valued฀ at฀ $96฀ million.฀ The฀ Corporation฀ recorded฀ a฀ deferred฀
gain฀of฀$42฀million฀from฀the฀transaction,฀representing฀the฀dif-
ferences฀between฀the฀consideration฀received฀and฀the฀carrying฀
value฀of฀its฀investment฀in฀Inmarsat฀Ventures฀of฀$168฀million.฀
During฀ 2004,฀ the฀ Corporation฀ received฀ cash฀ from฀ Inmarsat฀
Group฀Holdings,฀Ltd.฀amounting฀to฀ $50฀million,฀reducing฀its฀
investment฀ to฀ $46฀ million฀ while฀ maintaining฀ its฀ 14%฀ owner-
ship฀interest.฀
In฀June฀2005,฀Inmarsat฀plc฀(Inmarsat)฀completed฀its฀initial฀
public฀offering฀(IPO)฀of฀150฀million฀of฀its฀ordinary฀shares฀on฀
the฀London฀Stock฀Exchange.฀The฀IPO฀had฀the฀effect฀of฀dilut-
ing฀the฀Corporation’s฀ownership฀to฀8.9%.฀Inmarsat฀used฀a฀por-
tion฀of฀the฀proceeds฀to฀redeem฀certain฀remaining฀equity-related฀
instruments฀ held฀ by฀ shareholders,฀ including฀ the฀ Corporation.฀
As฀a฀result฀of฀these฀activities,฀the฀Corporation฀recognized฀the฀
$42฀ million฀ deferred฀ gain฀ that฀ had฀ been฀ recorded฀ in฀ 2003฀
related฀ to฀ this฀ investment.฀Subsequent฀to฀the฀ IPO,฀the฀ invest-
ment฀in฀Inmarsat฀has฀been฀accounted฀for฀at฀fair฀value,฀with฀the฀
unrealized฀ gains฀ reflected฀ as฀ a฀ net฀ after-tax฀ amount฀ in฀ other฀
comprehensive฀income.฀In฀October฀2005,฀the฀Corporation฀sold฀
approximately฀ 16฀ million฀ of฀ its฀ Inmarsat฀ shares฀ in฀ a฀ private฀
transaction฀ for฀ $89฀ million,฀ further฀ reducing฀ its฀ ownership฀
percentage฀ to฀ 5.3%.฀ The฀ above฀ transactions฀ resulted฀ in฀ the฀
recording฀ of฀ gains,฀ net฀ of฀ state฀ income฀ taxes,฀ totaling฀ $126฀
million฀in฀other฀income฀and฀expenses,฀and฀an฀increase฀in฀2005฀
net฀earnings฀of฀$82฀million฀($0.18฀per฀share).฀At฀December฀31,฀
2005,฀the฀increase฀in฀the฀fair฀value฀of฀Inmarsat฀shares฀held฀by฀
the฀Corporation฀resulted฀in฀an฀increase฀in฀other฀comprehensive฀
income฀of฀$93฀million,฀net฀of฀income฀taxes.฀In฀January฀2006,฀
the฀ Corporation฀ sold฀ an฀ additional฀ 12฀ million฀ shares฀ of฀
Inmarsat฀for฀$75฀million,฀reducing฀its฀ownership฀to฀2.6%.฀The฀
gain฀from฀this฀sale฀is฀expected฀to฀increase฀2006฀net฀earnings฀
by฀$47฀million฀($0.11฀per฀share).
In฀January฀2005,฀the฀Corporation฀completed฀the฀sale฀of฀its฀
25%฀interest฀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฀the฀fourth฀quarter฀of฀2005,฀the฀Corporation฀completed฀
the฀sale฀of฀its฀interest฀in฀NeuStar,฀Inc.฀(NeuStar).฀The฀transac-
tion฀ 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).฀
In฀ November฀ 2004,฀ a฀ private฀ equity฀ firm฀ purchased฀ the฀
outstanding฀shares฀of฀New฀Skies฀Satellites,฀N.V.฀(New฀Skies).฀
The฀Corporation฀sold฀its฀shares฀for฀$148฀million.฀The฀transac-
tion฀ resulted฀ in฀ the฀ recording฀ of฀ a฀ gain,฀ net฀ of฀ state฀ income฀
taxes,฀ of฀ $91฀ million฀ in฀ other฀ income฀ and฀ expenses,฀ and฀ an฀
increase฀in฀net฀earnings฀of฀$59฀million฀($0.13฀per฀share).฀The฀
carrying฀value฀of฀the฀ Corporation’s฀ investment฀ in฀New฀Skies฀
was฀ marked฀ to฀ market฀ through฀ other฀ comprehensive฀ income฀
prior฀to฀the฀sale.
Lockheed฀Martin฀Corporation
NOTES฀TO฀CONSOLIDATED฀FINANCIAL฀STATEMENTS
December฀31,฀2005