UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) - December 7, 2001
____________
LOCKHEED MARTIN CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 1-11437 52-1893632
(State or other jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
6801 Rockledge Drive, Bethesda, Maryland 20817
(Address of principal executive offices) (Zip Code)
(301) 897-6000
(Registrant's telephone number, including area code)
____________
Not Applicable
(Former name or address, if changed since last report)
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Item 5. Other Events
Lockheed Martin Corporation (Lockheed Martin or the Corporation) is filing
this Form 8-K to reflect the elimination of Global Telecommunications as a
separate business segment as discussed below.
On December 7, 2001, the Corporation announced that it would exit its
global telecommunications services business as a result of continuing
overcapacity in the telecommunications industry and deteriorating business and
economic conditions in Latin America. In connection therewith, the Corporation
will reassign certain of the businesses and investments in the Global
Telecommunications segment to other business segments, sell the remaining
operations, position the remaining investments for monetization, and eliminate
the administrative structure supporting such businesses and investments. The
Corporation will begin implementing these actions immediately.
Based on preliminary information and assessments, the Corporation expects
to recognize nonrecurring and unusual charges, net of state income tax benefits,
totaling approximately $2.0 billion in the fourth quarter of 2001 related to
these actions. The charges are expected to reduce net earnings by approximately
$1.7 billion, or $3.96 per diluted share. The estimated charges include
approximately $1.2 billion related to impairment of goodwill recorded in the
Global Telecommunications segment, and reflect impairment in the values of
certain other assets of the segment, as well as costs associated with related
infrastructure reductions, including severance and facilities. Also included in
the charges is a nonrecurring and unusual charge, net of state income tax
benefits, of approximately $400 million, $255 million after-tax, related to a
write-down of the Corporation's investment in Astrolink International, LLC
(Astrolink) and other associated costs. In its Form 10-Q for the third quarter
of 2001, the Corporation disclosed that, unless Astrolink was able to obtain
additional funding, the Corporation expected to record a charge in the fourth
quarter of 2001 related to its investment in Astrolink. The cash impact of these
fourth quarter charges is not expected to be material. Approximately 650
positions will be eliminated in the Global Telecommunications segment as a
result of these actions.
Lockheed Martin Global Telecommunications (LMGT), a wholly-owned subsidiary
of the Corporation, was formed effective January 1, 1999 from the combination of
investments in several existing joint ventures and certain other elements of the
Corporation previously included in the Systems Integration and Space Systems
segments. The Corporation began reporting LMGT as a separate business segment
beginning in the third quarter of 2000. In August 2000, Lockheed Martin
completed its merger with COMSAT Corporation (COMSAT). The operations of COMSAT
have been included in the results of operations of LMGT since August 1, 2000.
Prior to completion of the merger, the results of operations of LMGT included
the Corporation's 49% investment in COMSAT which was acquired on September 18,
1999 and accounted for under the equity method of accounting. The total purchase
price for COMSAT was approximately $2.6 billion. The COMSAT transaction was
accounted for using the purchase method of accounting. Purchase accounting
adjustments were recorded in 2000 to allocate the purchase price to assets
acquired and liabilities assumed based on their fair values. These
2
adjustments included certain amounts totaling approximately $2.1 billion,
composed of adjustments to record investments in equity securities acquired at
their fair values and cost in excess of net assets acquired (goodwill), which is
being amortized over an estimated life of 30 years. In addition, in
October 2000, the Corporation combined the operations of a business unit serving
commercial information technology markets (previously included in the Corporate
and Other segment) with LMGT.
The Global Telecommunications segment's businesses and investments will be
realigned, evaluated for divestiture or positioned for monetization as follows:
. The Systems & Technology line of business and the COMSAT General
telecommunications business unit will be realigned with the Space Systems
segment.
. Enterprise Solutions-U.S., a commercial information technology business,
will be realigned with the Technology Services segment.
. The remaining operating businesses will be evaluated for divestiture and
the equity investments will be positioned for monetization as follows:
- Operating businesses -
. Satellite services businesses - includes COMSAT Mobile
Communications, World Systems and Lockheed Martin Intersputnik.
Earlier in 2001, the Corporation announced that it had reached a
definitive agreement to sell COMSAT Mobile Communications'
operations to Telenor of Norway for $116.5 million in cash. This
transaction is expected to close in the fourth quarter of 2001
and, if consummated, is not expected to have a material impact
on the Corporation's consolidated results of operations.
. Enterprise Solutions-International - provides telecommunications
network services in Latin America, primarily Argentina
and Brazil.
- Equity investments -
. Satellite investments and ventures - includes INTELSAT, Ltd. (24%
ownership interest), Inmarsat (14% ownership interest), New Skies
Satellites, N.V. (14% ownership interest), ACeS International,
Ltd. (33% ownership interest), Americom Asia-Pacific, LLC (50%
ownership interest) and Astrolink (31% ownership interest). These
investments will be reported as part of the Corporate and Other
segment.
The Corporation has elected to adopt, effective January 1, 2001, Statement
of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." The new Statement supercedes current
accounting guidance relating to impairment of long-lived assets and provides a
single accounting methodology for long-lived assets to be disposed of, and also
supercedes existing guidance with respect to reporting the effects of the
disposal of a business.
3
With respect to the decision to exit the global telecommunications services
business and divest certain of the related business units, the operating
businesses identified for divestiture mentioned above meet the SFAS No. 144
requirements for classification as discontinued operations. Accordingly, the
results of operations of these businesses, as well as the impairment and other
charges related to the decision to exit these businesses, will be classified as
discontinued operations in the Corporation's consolidated statement of
operations for all periods presented, and will be excluded from business segment
information.
Management does not anticipate recognizing an impairment charge associated
with the Corporation's adoption of Statement of Financial Accounting Standards
(SFAS) No. 142, "Accounting for Goodwill and Other Intangible Assets," as of
January 1, 2002 with respect to its continuing businesses. Among other things,
the Statement sets forth a new methodology for periodically assessing and, if
warranted, recording impairment of goodwill. In connection with the impairment
provisions of the new rules, the Corporation will continue to evaluate the
amount of goodwill assigned to each of its continuing reporting units.
The following segment descriptions have been adjusted to reflect the
elimination of the Corporation's Global Telecommunications segment based on the
above information. The Corporation now operates in four principal business
segments. All other activities of the Corporation fall within the Corporate and
Other segment. Following is a brief description of the activities of each
business segment:
. Systems Integration - Engaged in the design, development, integration and
production of high performance electronic systems for undersea, shipboard,
land, and airborne applications. Major product lines include missiles and
fire control systems; air and theater missile defense systems; surface ship
and submarine combat systems; anti-submarine and undersea warfare systems;
avionics and ground combat vehicle integration; platform integration
systems; command, control, communications, computers and intelligence (C4I)
systems for naval, airborne and ground applications; surveillance and
reconnaissance systems; air traffic control systems; and postal automation
systems.
. Space Systems - Engaged in the design, development, engineering and
production of civil, commercial and military space systems. Major product
lines include spacecraft,
4
space launch vehicles and manned space systems; their supporting ground
systems and services; and strategic fleet ballistic missiles. In addition
to its consolidated business units, the segment has investments in joint
ventures that are principally engaged in businesses which complement and
enhance other activities of the segment.
. Aeronautics - Engaged in design, research and development, and production
of combat and air mobility aircraft, surveillance/command systems,
reconnaissance systems, platform systems integration and advanced
development programs. Major products and programs include the F-35 (Joint
Strike Fighter), the F-16 multi-role fighter, the F-22 air-superiority
fighter, the C-130J tactical airlift aircraft, and support for the C-5,
F-117 and U2 aircraft.
. Technology Services - Provides a wide array of management, engineering,
scientific, logistic and information services to federal agencies and other
customers. Major product lines include e-commerce, enterprise information
services, software modernization, information assurance and data center
management primarily for DOD and civil government agencies, and also for
commercial customers; engineering, science and information services for
NASA; aircraft and engine maintenance and modification services;
management, operation, maintenance, training, and logistics support for
military and civilian systems; launch, mission, and analysis services for
military, classified and commercial satellites; and research, development,
engineering and science in support of nuclear weapons stewardship and naval
reactor programs.
. Corporate and Other - Includes the Corporation's properties line of
business, investments in INTELSAT, Ltd., Inmarsat, New Skies Satellites and
other global telecommunications investments, as well as various other
Corporate activities.
The following amounts, which are unaudited, have been adjusted to reflect
the elimination of the Corporation's Global Telecommunications segment for the
periods indicated based on the above information. In addition, the Corporation
previously announced that, on August 24, 2001, it completed the sale of Lockheed
Martin IMS Corporation (IMS), a wholly-owned subsidiary, for $825 million in
cash. The transaction resulted in a nonrecurring and unusual gain, net of state
income taxes, of $476 million and increased net earnings by $309 million, or
$.72 per diluted share. The results of IMS' operations for all periods
presented, as well as the gain on the sale, have been reclassified to
discontinued operations in accordance with SFAS No. 144. The results of
operations and related gains or losses associated with businesses divested prior
to the effective date of the Corporation's adoption of SFAS No. 144 (January 1,
2001), including the divestitures of the Corporation's Aerospace Electronics
Systems (AES) businesses and Lockheed Martin Control Systems in 2000, have not
been reclassified to discontinued operations in accordance with the Statement.
5
Selected Financial Data by Business Segment -
(Unaudited)
Nine Months Ended Year Ended
September 30, December 31,
2001 2000 2000 1999
---- ---- ---- ----
(In millions)
Net sales
---------
Systems Integration $ 6,282 $ 6,730 $ 9,647 $ 9,570
Space Systems 5,023 5,258 7,339 7,285
Aeronautics 3,362 3,327 4,885 5,499
Technology Services 1,972 1,869 2,649 2,574
Corporate and Other 17 42 21 71
-------- -------- -------- --------
$ 16,656 $ 17,226 $ 24,541 $ 24,999
======== ======== ======== ========
Operating profit (loss)
-----------------------
Systems Integration $ 570 $ 155 $ 583 $ 880
Space Systems 414 307 401 506
Aeronautics 285 245 343 247
Technology Services 100 42 82 137
Corporate and Other (438) (111) (158) 227
-------- -------- -------- --------
$ 931 $ 638 $ 1,251 $ 1,997
======== ======== ======== ========
Depreciation and amortization
-----------------------------
Systems Integration $ 108 $ 146 $ 183 $ 223
Space Systems 103 104 152 165
Aeronautics 61 65 88 82
Technology Services 14 11 15 15
Corporate and Other 31 38 48 51
-------- -------- -------- --------
$ 317 $ 364 $ 486 $ 536
======== ======== ======== ========
Amortization of intangible assets
---------------------------------
Systems Integration $ 165 $ 195 $ 245 $ 276
Space Systems 42 42 56 57
Aeronautics 60 60 81 80
Technology Services 13 14 18 18
Corporate and Other 22 24 25 10
-------- -------- -------- --------
$ 302 $ 335 $ 425 $ 441
======== ======== ======== ========
Nonrecurring and unusual items
------------------------------
included in operating profit (loss)
-----------------------------------
Systems Integration $ - - $ (455) $ (304) $ 13
Space Systems 111 17 25 21
Aeronautics - - - - - - - -
Technology Services - - (34) (34) - -
Corporate and Other (466) (109) (226) 215
-------- -------- -------- --------
$ (355) $ (581) $ (539) $ 249
======== ======== ======== ========
6
Selected Financial Data by Business Segment (continued) -
(Unaudited)
Quarter Ended
September 30, June 30, March 31,
2001 2001 2001
---- ---- ----
(In millions)
Net sales
---------
Systems Integration $ 2,237 $ 2,165 $ 1,880
Space Systems 1,793 1,808 1,422
Aeronautics 1,449 1,058 855
Technology Services 734 654 584
Corporate and Other 8 3 6
------- ------- -------
$ 6,221 $ 5,688 $ 4,747
======= ======= =======
Operating profit (loss)
-----------------------
Systems Integration $ 203 $ 194 $ 173
Space Systems 119 107 188
Aeronautics 117 89 79
Technology Services 36 32 32
Corporate and Other (362) 3 (79)
------- ------- -------
$ 113 $ 425 $ 393
======= ======= =======
Depreciation and amortization
-----------------------------
Systems Integration $ 37 $ 35 $ 36
Space Systems 39 34 30
Aeronautics 21 20 20
Technology Services 7 4 3
Corporate and Other 7 12 12
------- ------- -------
$ 111 $ 105 $ 101
======= ======= =======
Amortization of intangible assets
---------------------------------
Systems Integration $ 54 $ 55 $ 56
Space Systems 14 14 14
Aeronautics 20 20 20
Technology Services 5 4 4
Corporate and Other 7 8 7
------- ------- -------
$ 100 $ 101 $ 101
======= ======= =======
Nonrecurring and unusual items
------------------------------
included in operating profit (loss)
-----------------------------------
Systems Integration $ -- $ -- $ --
Space Systems -- -- 111
Aeronautics -- -- --
Technology Services -- -- --
Corporate and Other (366) -- (100)
------- ------- -------
$ (366) $ -- $ 11
======= ======= =======
7
Selected Financial Data by Business Segment (continued)-
(Unaudited)
Quarter Ended
December 31, September 30, June 30, March 31,
2000 2000 2000 2000
(In millions)
Net sales
---------
Systems Integration $ 2,917 $ 2,325 $ 2,334 $ 2,071
Space Systems 2,081 1,684 1,810 1,764
Aeronautics 1,558 1,038 1,253 1,036
Technology Services 780 652 679 538
Corporate and Other (21) 22 (6) 26
------- ------- ------- -------
$ 7,315 $ 5,721 $ 6,070 $ 5,435
======= ======= ======= =======
Operating profit (loss)
----------------------
Systems Integration $ 428 $ (215) $ 202 $ 168
Space Systems 94 113 117 77
Aeronautics 98 77 89 79
Technology Services 40 1 30 11
Corporate and Other (47) 3 (110) (4)
------- ------- ------- -------
$ 613 $ (21) $ 328 $ 331
======= ======= ======= =======
Depreciation and amortization
-----------------------------
Systems Integration $ 37 $ 42 $ 52 $ 52
Space Systems 48 37 34 33
Aeronautics 23 22 22 21
Technology Services 4 3 4 4
Corporate and Other 10 15 10 13
------- ------- ------- -------
$ 122 $ 119 $ 122 $ 123
======= ======= ======= =======
Amortization of intangible assets
---------------------------------
Systems Integration $ 50 $ 59 $ 68 $ 68
Space Systems 14 14 14 14
Aeronautics 21 20 20 20
Technology Services 4 5 5 4
Corporate and Other 1 8 8 8
------- -------- -------- -------
$ 90 $ 106 $ 115 $ 114
======= ======== ======== =======
Nonrecurring and unusual items
------------------------------
included in operating profit (loss)
----------------------------------
Systems Integration $ 151 $ (455) $ -- $ --
Space Systems 8 -- -- 17
Aeronautics -- -- -- --
Technology Services -- (28) -- (6)
Corporate and Other (117) -- (108) (1)
------- -------- -------- ---------
$ 42 $ (483) $ (108) $ 10
======= ======== ======== =========
8
Selected Financial Data by Business Segment (continued)-
(Unaudited)
September 30, June 30, March 31, December 31,
2001 2001 2001 2000
---- ---- ---- ----
(In millions)
Backlog
-------
Systems Integration $ 15,576 $ 16,275 $ 17,027 $ 16,706
Space Systems 14,055 14,511 15,406 15,505
Aeronautics 17,237 17,214 17,484 17,570
Technology Services 4,581 4,686 5,229 5,288
Corporate and Other 6 7 7 7
-------- -------- -------- ---------
$ 51,455 $ 52,693 $ 55,153 $ 55,076
======== ======== ======== =========
September 30, June 30, March 31, December 31,
2000 2000 2000 1999
---- ---- ---- ----
(In millions)
Backlog
-------
Systems Integration $ 16,953 $ 17,801 $ 14,252 $ 13,971
Space Systems 16,007 15,719 15,599 16,508
Aeronautics 16,744 17,119 10,084 9,003
Technology Services 5,137 5,286 5,495 5,320
Corporate and Other 7 7 5 5
-------- -------- -------- ---------
$ 54,848 $ 55,932 $ 45,435 $ 44,807
======== ======== ======== =========
9
Selected Consolidated Financial Information -
(Unaudited)
Nine Months Ended Year Ended
September 30, December 31,
2001 2000 2000 1999
---- ---- ---- ----
(In millions, except per share data)
Net sales $ 16,656 $ 17,226 $ 24,541 $ 24,999
Earnings from operations 1,187 1,162 1,660 1,653
Earnings (loss) from continuing operations before
extraordinary item and cumulative effect of change
in accounting $ 225 $ (596) $ (382) $ 729
Discontinued operations 273 (12) (42) 8
Extraordinary item (36) -- (95) --
Cumulative effect of change in accounting -- -- -- (355)
-------- -------- -------- --------
Net earnings (loss) $ 462 $ (608) $ (519) $ 382
======== ======== ======== ========
Diluted earnings (loss) per share:
Earnings (loss) from continuing operations
before extraordinary item and cumulative effect
of change in accounting $ .52 $ (1.51) $ (.95) $ 1.90
Discontinued operations .63 (.03) (.10) .02
Extraordinary item (.08) -- (.24) --
Cumulative effect of change in accounting -- -- -- (.93)
-------- -------- -------- --------
Net earnings (loss) per share $ 1.07 $ (1.54) $ (1.29) $ .99
======== ======== ======== ========
Average number of common shares outstanding for
diluted computations 430.3 394.1 400.8 384.1
======== ======== ======== ========
10
Nonrecurring and Unusual Items Included in Net Earnings (Loss) -
(Unaudited)
Earnings (loss)
Operating Net per
profit (loss) earnings (loss) diluted share
------------- --------------- ---------------
(In millions, except per share data)
Nine months ended September 30, 2001
------------------------------------
Continuing operations
Write-down of investment in Loral Space $ (361) $ (235) $ (.55)
Sale of surplus real estate 111 72 .17
Impairment charge related to Americom
Asia-Pacific (100) (65) (.15)
Other portfolio shaping activities (5) (3) (.01)
------- ------- -------
(355) (231) (.54)
Discontinued operations
Gain on disposal and other charges -- 309 .72
Extraordinary item
Loss on early extinguishment of debt -- (36) (.08)
------- ------- -------
Total $ (355) $ 42 $ .10
======= ======= =======
Nine months ended September 30, 2000
------------------------------------
Continuing operations
Impairment loss on AES $ (755) $ (980) $ (2.49)
Gain on sale of Control Systems 302 180 .46
Charge related to Globalstar guarantee (141) (91) (.23)
Partial reversal of CalComp reserve 33 21 .05
Sale of surplus real estate 20 13 .03
Other portfolio shaping activities (40) (26) (.06)
------- ------- -------
(581) (883) (2.24)
Discontinued operations -- -- --
------- ------ -------
Total $ (581) $ (883) $ (2.24)
======= ====== =======
11
Nonrecurring and Unusual Items Included in Net Earnings(Loss)- (continued) -
(Unaudited)
Earnings(loss)
Operating Net per
profit(loss) earnings(loss) diluted share
------------ -------------- -------------
(In millions, except per share data)
Year ended December 31, 2000
----------------------------
Continuing operations
Loss related to AES Transaction $(598) $ (878) $(2.18)
Gain on sale of Control Systems 302 180 .45
Charge related to Globalstar guarantee (141) (91) (.23)
Impairment charge related to ACeS (117) (77) (.19)
Partial reversal of CalComp reserve 33 21 .05
Sale of surplus real estate 28 19 .05
Other portfolio shaping activities (46) (30) (.07)
----- ------ ------
(539) (856) (2.12)
Discontinued operations -- -- --
Extraordinary items
Loss on early extinguishment of debt -- (95) (.24)
----- ------ ------
Total $(539) $ (951) $(2.36)
===== ====== ======
Year ended December 31, 1999
----------------------------
Continuing operations
Divestiture of interest in L-3 $ 155 $ 101 $ .26
Sale of surplus real estate 57 37 .10
Partial reversal of CalComp reserve 20 12 .03
Other portfolio shaping activities 17 12 .03
----- ------ ------
249 162 .42
Discontinued operations -- -- --
Cumulative effect of change in
accounting principle -- (355) (.93)
----- ------ ------
Total $ 249 $(193) $ (.51)
===== ====== ======
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Forward Looking Statements
NOTE: Statements in this Form 8-K, including statements relating to projected
future performance, are considered forward looking statements under federal
securities laws. Sometimes these statements will contain words such as
"believes," "expects," "intends," "plans," "estimates," "outlook," "forecast,"
or other similar words. These statements are not guarantees of future
performance and are subject to risks, uncertainties and other important factors
that could cause our actual performance or achievements to be materially
different from those we may project.
Our actual financial results will likely be different from those projected due
to the inherent nature of projections and may be better or worse than projected.
Given these uncertainties, you should not rely on forward-looking statements.
Forward-looking statements also represent our estimates and assumptions only as
of the date that they are made. We expressly disclaim a duty to provide updates
to forward-looking statements, and the estimates and assumptions associated with
them, after the date of this Form 8-K to reflect events or circumstances,
changes in expectations or the occurrence of anticipated events.
In addition to the factors set forth in our 2000 Form 10-K and other more recent
filings with the Securities and Exchange Commission (www.sec.gov), the following
factors could affect our forward-looking statements: our ability to achieve or
quantify savings for our customers or ourselves through our global cost-cutting
program and other financial management programs; the ability to obtain or the
timing of obtaining future government awards; the availability of government
funding and customer requirements both domestically and internationally; changes
in government or customer priorities due to program reviews or revisions to
strategic objectives (including changes in priorities to respond to recent
terrorist threats or to improve homeland protection); difficulties in developing
and producing operationally advanced technology systems; the competitive
environment; economic business and political conditions domestically and
internationally (including economic disruption caused by terrorist threats);
program performance and the timing of contract payments; the timing and customer
acceptance of product deliveries and launches; and the outcome of contingencies
(including completion of acquisitions and divestitures, litigation and
environmental remediation efforts). Our ability to monetize assets or businesses
placed in discontinued operations will depend upon market conditions,
negotiation of acceptable terms with prospective purchasers and other factors,
and may require receipt of various regulatory or governmental approvals. In
addition, realization of the value of the Corporation's investments in equity
securities may be affected by the investee's ability to obtain adequate funding
and execute its business plan, general market conditions, industry
considerations specific to the investee's business, and/or other factors. These
are only some of the numerous factors that may affect the forward-looking
statements contained in this Form 8-K.
13
LOCKHEED MARTIN CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LOCKHEED MARTIN CORPORATION
---------------------------
(Registrant)
Date: December 7, 2001 by: /s/Rajeev Bhalla
--------------------- -----------------
Rajeev Bhalla
Vice President and Controller
(Chief Accounting Officer)
14