Lockheed Martin To Exit Global Telecommunications Services Business
Reinforces Focus on Core Businesses and Customers
Announces a Nonrecurring and Unusual Charge of $1.7 Billion
Reaffirms 2001 and 2002 Recurring Earnings & Cash Flow Outlook
Lockheed Martin Corporation
(NYSE:LMT) today announced plans to exit its Global Telecommunications
services business. As a result, the Corporation will reassign certain of the
former Lockheed Martin Global Telecommunications (LMGT) businesses and
investments to other operating segments of Lockheed Martin, sell the
remaining operations, position investments for monetization, and eliminate
the LMGT administrative structure. The Corporation will begin implementing
these actions immediately.
“In view of continuing overcapacity in the telecommunications industry
worldwide, and deteriorating business and economic conditions in Latin
America, we no longer anticipate that the LMGT businesses as a whole will be
able to generate sufficient returns to justify continued investment. As a
result, we are reducing our exposure to this market,” said Vance Coffman,
chairman and chief executive officer of Lockheed Martin. “We must continue
to focus on core business performance, customer satisfaction, profitable
growth and attractive returns on investments to grow shareholder value.”
Based on preliminary information and assessments, the Corporation expects to
recognize after-tax nonrecurring and unusual charges in the fourth quarter
of 2001 totaling $1.7 billion, or $3.96 per share ($2.0 billion on a pretax
basis) related to these actions. The estimated charges reflect impairment in
the values of certain LMGT businesses and investments, goodwill
(approximately $1.2 billion) and other assets as well as costs associated
with infrastructure reductions, including severance, and facilities.
Included in this charge is approximately $255 million ($400 million pretax)
related to a write-down of the Corporation’s investment in Astrolink
International LLC and other associated costs, as disclosed in Lockheed
Martin’s Form 10-Q for the third quarter of 2001.
The cash impact of the fourth quarter charge is not expected to be material
and should amount to less than 2 percent of the total charge. Previous
guidance for 2001 and 2002 free cash flow and recurring earnings is
unaffected by these actions. Recurring earnings guidance includes the
results of operations for all businesses and investments until their
ultimate disposal. With this charge, management does not anticipate any
further goodwill impairment charges associated with the Corporation’s
adoption of Statement of Financial Accounting Standards No. 142, “Accounting
for Goodwill and Other Intangible Assets” in January 2002.
Approximately 650 LMGT positions will be eliminated as a result of these
actions. These employees will have the opportunity to apply for job openings
with Lockheed Martin operating companies. To date, about one third have
accepted or have been extended offers. Actions announced today include the
following:
LMGT’s Systems & Technology line of business and its COMSAT General
telecommunications unit will be realigned with the Space Systems business
area. The strengths of these units in network systems engineering and
integration, along with their advanced satellite communications
technologies, will complement Space Systems’ capabilities. The combined
annual revenue for these two units is approximately $150 million.
LMGT’s Enterprise Solutions-U.S. commercial information technology business
will be realigned with the Corporation’s Technology Services business area.
This action, along with the recently announced acquisition of OAO
Corporation, will further leverage the Corporation’s IT capabilities and
enhance offerings to the government and large enterprise commercial
customers. Enterprise Solutions-U.S.’s annual revenue is approximately $300
million.
LMGT’s remaining operating businesses will be evaluated for divestiture and
its equity investments positioned for monetization. In the interim, the
operating businesses will be reported as discontinued operations, and the
investments will be included in the Corporate and Other segment for
financial reporting purposes. Discontinued operating businesses and
divestiture candidates include: Satellite Services (COMSAT Mobile
Communications, World Systems and Lockheed Martin Intersputnik); and
Enterprise Solutions-International (providing telecommunications network
services primarily in Latin America). The disposition of these assets will
be subject to valuation, negotiation, and appropriate Corporate approval.
The Corporation previously announced that it had reached an agreement to
sell the COMSAT Mobile Communications operations (which provides global
service via the Inmarsat system) to Telenor of Norway for $116.5 million in
cash. The sale is anticipated to close by year-end and is not expected to
have a material earnings impact.
LMGT’s equity investments to be reported in the Corporate and Other segment
include: INTELSAT (24% ownership), Inmarsat (14% ownership), New Skies, N.V.
(14% ownership), ACeS International (33% ownership), Americom Asia-Pacific
(50% ownership) and Astrolink International (31% ownership).
As a result of these actions, the Corporation prospectively will report its
results in four core operating segments: Systems Integration, Aeronautics,
Space Systems, and Technology Services. The Corporation plans to file a Form
8-K to conform its historical segment results based on these actions.
Lockheed Martin is a global enterprise principally engaged in the research,
design, development, manufacture and integration of advanced technology
systems, products and services. The Corporation’s core businesses are
systems integration, space, aeronautics and technology services.
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NEWS MEDIA CONTACTS:
James Fetig, 301/897-6352, Lockheed Martin Corporate
Charles Manor, 301-214-3115, Lockheed Martin Global Telecommunications
INVESTOR RELATIONS CONTACTS:
James Ryan, 301/897-6584 or
Randa Middleton, 301/897-6455
Web site: www.lockheedmartin.com
SAFE HARBOR:
NOTE: Statements in this press release, 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 press release 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 and economic 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 press release.
