Lockheed Martin 1995 Annual Report Download

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1995
Annual
Report

Table of contents

  • Page 1
    1 9 9 5 A n n u a l R e p o r t

  • Page 2
    ...17 per common share. Contents To Our Shareholders Vision Statement Operating Companies Operating Highlights Aeronautics Sector Electronics Sector Energy & Environment Sector Information & Technology Services Sector Space & Strategic Missiles Sector Financial Information Corporate Directory General...

  • Page 3
    M i s s i o n S u c c e s s Our commitment to and total satisfaction customer in every goal we set and every task we

  • Page 4
    ...cash management paid off with $882 million in free cash flow during 1995, which we applied in several ways to enhance shareholder value, including paying dividends, reducing debt, internal growth, acquisitions and repurchasing 2.3 million shares of common stock. In our first year of operation, sales...

  • Page 5
    ... to achieve superior performance and total customer satisfaction in every goal we set and every task we undertake. A key measure of Lockheed Martin's mission success during 1995 was our record for meeting major program milestones and commitments. Just in terms of strategic and tactical missile...

  • Page 6

  • Page 7
    ... increasing economies of scale, capitalizing on corporate-wide synergies and leveraging our added financial strength, consolidation will benefit shareholders, customers and employees. Norman R. Augustine President and Chief Executive Officer Management Succession Toward the end of Lockheed Martin...

  • Page 8
    ... standards of ethical conduct at every level, which is our uncompromising pledge to our colleagues, customers, shareholders, suppliers and the public. Lockheed Martin is opening a new chapter in the future of our industry. Success in our extremely competitive, diverse global business depends on the...

  • Page 9
    ...for Lockheed Martin to be recognized as the world's premier systems engineering and technology enterprise. Our mission is to build on our aerospace heritage to meet the needs of our customers with high-quality products and services. And, in so doing, produce superior returns for our shareholders and...

  • Page 10
    Sector Aeronautics Operating Lockheed Martin Skunk Works Palmdale, California Lockheed Martin Aircraft Center Greenville, South Carolina Companies Lockheed Martin Aeronautics International Ontario, California Lockheed Martin Logistics Management Arlington, Texas President and Chief Operating ...

  • Page 11
    ... Inc. Las Vegas, Nevada Lockheed Martin Utility Services Bethesda, Maryland Technology Ventures Corp. Albuquerque, New Mexico Lockheed Martin Specialty Components Largo, Florida Lockheed Martin Services Group KAPL A Lockheed Martin Company Lockheed Martin Commercial Systems Group Access Graphics...

  • Page 12
    ... ofspace Lockheed Martin products and services set the standard for industry leadership in aircraft, energy and environmental remediation, missiles, electronics, information systems, spacecraft and launch vehicles. Every day, our talented and dedicated employees utilize innovative technologies and...

  • Page 13
    Sky Sea

  • Page 14
    Space

  • Page 15
    Land

  • Page 16
    ... capabilities are designed to provide a new level of versatility to future Joint Force Commanders. Production of 442 aircraft is expected to begin in 1998. Lockheed Martin is pursuing a range of tactical aircraft program opportunities that include additional F-16 sales to international customers as...

  • Page 17
    The F-22 is the next generation air superiority fighter. The F-22 cockpit mockup, here, illustrates the sophistication of this 21st century aircraft.

  • Page 18
    Making its debut on October 18, 1995, the C-130J is attracting the attention of U.S. and international military transport customers. The United Kingdom and Australia have selected the J as their next generation airlifter.

  • Page 19

  • Page 20
    ... program, JAST, a common, affordable joint strike fighter for the U.S. Air Force, Navy, Marines and British Royal Navy. Lockheed Martin Tactical Aircraft Systems is coordinating the Corporation's overall JAST effort, which applies technical expertise from companies throughout the Aeronautics Sector...

  • Page 21
    ...four new airline customers. The improved quality and efficiency of composite thrust reversers produced for Pratt & Whitney 4168 engines has resulted in an excellent flight service record. Aero & Naval's MK-41 Vertical Launching System continues to exceed production schedules and meet mission success...

  • Page 22
    ... of synergy benefits is the contract award to Lockheed Martin Control Systems for the avionics systems' central computer on the C-17 Globemaster III aircraft. Sanders is a major subcontractor to Control Systems, providing the central processing unit. Other major competitive wins in 1995 added to...

  • Page 23
    ... by all branches of the U.S. military. Also, the U.S. Marine Corps executed a contract with Lockheed Martin Armament Systems to produce 17 Light Armored Vehicle - Air Defense (LAV-AD) systems. The LAV-AD system, which protects Marine forces against air attack, utilizes a Blazer air defense turret on...

  • Page 24
    Integrated Defensive Electronic Countermeasures (IDECM) system consists of a variety of components that together improve the survivability of combat aircraft. The Fiber Optic Towed Decoy, here, is used to confuse enemy missiles.

  • Page 25
    ..., New York, creates a world-class organization specializing in design, development, production and service of advanced electronic engine controls, as well as a wide range of controls for other aircraft and industrial applications. Defense Systems formed AV Technology, LLC, which will supply turret...

  • Page 26
    The AEGIS shipboard combat system is capable of simultaneously engaging threats from the air, the surface and under the sea. Developed for the U.S. Navy, AEGIS also is deployed by the Japanese Maritime Self Defense Force.

  • Page 27

  • Page 28
    ...December, the Department of Energy and Lockheed Martin agreed to operate the Oak Ridge National Laboratory, a major national science center, under a separate contract, which will be performed by a new operating unit in the Energy & Environment Sector, Lockheed Martin Energy Research Corporation. 26

  • Page 29
    Sandia National Laboratories, managed by Lockheed Martin for the Department of Energy, is at the forefront of robotic vehicle design. Robots, like the Ratler, may explore the moon.

  • Page 30

  • Page 31
    ... Cold War. Lockheed Martin's Energy & Environment Sector also manages the Idaho National Engineering Laboratory and Sandia National Laboratories, both of which are in the forefront of military and civil research, as well as technology development for possible transfer to the private sector. In 1995...

  • Page 32
    ...procurement, finance, training and construction, and will submit recommendations to the Secretary of Energy this year. We also are confident that this approach will yield significant new business opportunities in the public and private sectors. Last year, Lockheed Martin Utility Services was awarded...

  • Page 33
    ... Services Sector provides systems design, development, integration and operations for federal, state and municipal governments, as well as information systems and products to commercial customers. In 1995, the Information & Technology Services Sector continued an outstanding competitive win rate...

  • Page 34
    Lockheed Martin Information Systems is developing an Automated Fingerprint Identification Segment (AFIS) for the FBI that will provide 24-hour turnaround on requests that now take months to process.

  • Page 35
    Motorists using the Verrazano-Narrows Bridge in New York City can save time and avoid lines by using the E-ZPass electronic toll collection service provided by Lockheed Martin IMS.

  • Page 36
    ...the personal computer market, and real time software applications. T h e Information & Technology Services Sector is on the cutting edge of rapidly evolving distributed client-server computing. N u m e r o u s customers have contracted with the Sector to help re-engineer their business processes and...

  • Page 37

  • Page 38
    ... its global distribution channels. Lockheed Martin Commercial Electronics continued its outstanding record of high quality electronic manufacturing services for its diverse set of customers in the computer and telecommunications industries. Underlying the Sectors growth businesses is a solid...

  • Page 39
    ... significantly. As part of Lockheed Martin's strategy to serve the broadest range of launch vehicle customers, we formed ILS International Launch Services in 1995 - a joint venture with Russia's Khrunichev State Research and Production Space Center and RSC Energia - to market the Atlas and Proton...

  • Page 40

  • Page 41
    Lockheed Martin is a premier designer and producer of environmental monitoring satellites such as TIROS, here. Today, TIROS weather satellites meet the data requirements of 140 nations.

  • Page 42
    ... regulatory approval, strategic alliance commitments and external investment. Lockheed Martin's Astro Space Commercial will build on a rich heritage of commercial satellite design and production. A new world-class facility in Sunnyvale, California, should accelerate production cycle times and reduce...

  • Page 43
    ... work valued at $1.3 billion. Lockheed Martin Technical Operations continued its record of mission success in engineering and technical services for the Department of Defense, NASA and other government and private sector customers, and has consistently received award fees in the "excellent" category...

  • Page 44
    The second Titan IV launch of a Department of Defense Milstar satellite on November 7 demonstrates the unique synergy of capabilities inherent in Lockheed Martin, which built the launch vehicle, its Centaur upper stage and the satellite, and integrated the stack before launch.

  • Page 45
    ... Condition and Results of Operations 57 The Corporation's Responsibility for Financial Reporting 57 Report of Ernst & Young LLP, Independent Auditors 58 Consolidated Statement of Earnings 59 Consolidated Statement of Cash Flows 60 Consolidated Balance Sheet 61 Consolidated Statement...

  • Page 46
    ... to Loral shareholders by the Corporation through a tender offer for all outstanding shares of Loral common stock for $38.00 per share in cash. Following the consummation of the tender offer, Loral will distribute, for each share of Loral common stock previously held, one share of common stock of...

  • Page 47
    Lockheed Martin Corporation Business Acquisitions Effective May 1, 1994, the Corporation purchased the Space Systems Division of General Dynamics Corporation (GD Space Systems) for approximately $160 million in cash, expanding the Corporation's presence in the intermediate-lift space launch vehicle...

  • Page 48
    ... Space & Strategic Missiles, Information & Technology Services and (a) Excluding the effects of the Materials IPO, the acquisition termination fee, and the change in ESOP accounting, 1994 net earnings would have been $955 million. (b) Excluding the merger related and consolidation charges, 1995 net...

  • Page 49
    ...this consolidation activity. The Corporation's recent acquisitions described above are examples of actions that have been taken to blend successful operations and broaden the business portfolio, create opportunities for increased efficiency and cost competitiveness, improve access to new markets and...

  • Page 50
    ... Segments The Corporation's operations are divided into five reportable business segments: Space & Strategic Missiles; Aeronautics; Information & Technology Services; Electronics; and Energy, Materials and Other. The following table displays net sales for the Lockheed Martin business segments for...

  • Page 51
    ...with the industry segment information contained in Note 15 to the consolidated financial statements. (In millions) Operating Profit, Excluding Nonrecurring Items Space & Strategic Missiles Aeronautics Information & Technology Services Electronics Energy, Materials and Other 1995 1994 1993 $ 694 532...

  • Page 52
    ... offset by decreases in certain contract field support programs. Operating profit increased by four percent in 1995 compared to 1994 even though sales decreased for that period. This increase is principally due to recognition of earnings related to the P-3 aircraft deliveries which more than offset...

  • Page 53
    Lockheed Martin Corporation of the 1994 sales variances described above, improved performance in C-130 programs and higher profit margins in special tactical aircraft systems programs. Information & Technology Services Net sales of the Information & Technology Services segment increased by six ...

  • Page 54
    ... National Engineering Laboratories Management and Operations and Pit 9 contracts in the fourth quarter of 1994 and the January 1995 Materials acquisition of the construction aggregates business of Dravo Corporation. The primary reason for the increase in 1994 net sales was the increase in sales of...

  • Page 55
    ... in net positive cash flow, as Dividends Per Common Share the proceeds from the Materials IPO and the Grumman termination fee more than offset the cash expended for the acquisition of GD Space Systems. The Corporation continued to reduce outstanding long-term debt in 1995, consistent with 1994...

  • Page 56
    ... and replaced with the New Credit Facilities. Following the closing of the transactions, it is anticipated that the Corporation will refinance all or a portion of the borrowings under the New Credit Facilities with funds raised in the public or private securities markets. The Corporation may

  • Page 57
    ... to meet the anticipated operating, consolidation and debt service requirements, discretionary investment needs and capital expenditures of the Corporation. If the business combination with Loral is consummated, management will evaluate potential near-term actions which may permit the Corporation to...

  • Page 58
    ... the Corporation's consolidated earnings and financial position. Also in 1995, the FASB adopted SFAS No. 123, "Accounting for Stock-Based Compensation." While SFAS No. 12 3 establishes financial accounting and reporting standards for stock-based employee compensation plans using a fair value method...

  • Page 59
    ... the distribution of written codes of ethics and standards of business conduct and through ongoing education and review programs designed to create a strong compliance environment. The Audit and Ethics Committee of the Board of Directors is composed of eight outside directors. This Committee meets...

  • Page 60
    ... per share data) 1995 Year Ended December 31 1994 1993 $22,397 20,857 1,540 44 1,584 278 1,306 477 829 $ 829 Net sales Costs and expenses: Cost of sales Merger related and consolidation expenses Earnings from operations Other income and expenses, net Interest expense Earnings before income taxes...

  • Page 61
    ...public offering Other Net cash used for investing activities Financing Activities Decreases in short-term borrowings Increases in long-term debt Repayments and extinguishments of long-term debt Issuances of common stock Purchases of common stock Dividends on common stock Dividends on preferred stock...

  • Page 62
    ... Salaries, benefits and payroll taxes Income taxes Current maturities of long-term debt Other current liabilities Total current liabilities Long-term debt Post-retirement benefit liabilities Other liabilities Stockholders' equity: Series A preferred stock, $50 liquidation preference per share Common...

  • Page 63
    Lockheed Martin Corporation C o n s o l i d a t e d S t o c k h o l d e r s ' S t a t e m e n t E q u i t y o f (In millions) Balance at December 31, 1992 Net earnings Preferred stock issued Dividends declared on preferred stock ($2.25 per share) Dividends declared on common stock ($1.09 per ...

  • Page 64
    ... Accounting Policies Organization - Lockheed Martin Corporation (Lockheed Martin or the Corporation) is engaged in the design, manufacture, integration and operation of a broad array of products and services ranging from aircraft, spacecraft and launch vehicles to energy management, missiles...

  • Page 65
    .... Incentives or penalties and awards applicable to performance on contracts are considered in estimating sales and profit rates and are recorded when there is sufficient information to assess anticipated contract performance. Incentive provisions which increase or decrease earnings based solely...

  • Page 66
    ...the Corporations would merge through an exchange of stock (the Business Combination). The Business Combination was consummated after stockholders' approval on March 15,1995. Under the terms of the Reorganization Agreement, each outstanding share of Lockheed common stock was exchanged for 1.63 shares...

  • Page 67
    ... under the New Credit Facilities with funds raised in the public or private securities markets. Note 4 - Acquisitions On May 1, 1994, the Corporation completed its acquisition of the Space Systems Division of General Dynamics Corporation (the Space Systems Division) for cash. This transaction...

  • Page 68
    ...military aircraft business of General Dynamics Corporation (formerly, the GD Fort Worth Division) for approximately $1.5 billion in cash, plus the assumption of certain liabilities related to the business. The acquisition was recorded under the purchase method of accounting. Pro forma financial data...

  • Page 69
    ... investment grade, holders of the notes may require the Corporation to purchase the notes and pay accrued interest. These notes are obligations of the ESOP but guaranteed by the Corporation and are reported as debt on the Corporation's consolidated balance sheet. The Corporation's long-term debt...

  • Page 70
    ... consolidated balance sheet. The fair values were estimated based on quoted market prices for those instruments publicly traded. For privately placed debt, the fair values were estimated based on the quoted market prices for the same or similar issues, or on current rates offered to the Corporation...

  • Page 71
    ... an Agreement and Plan of Merger with Grumman Corporation (Grumman) and made an offer to purchase for cash all outstanding shares of common stock of Grumman. Subsequently, Grumman reached agreement with and accepted Northrop Corporation's competing offer to purchase its outstanding common shares. In...

  • Page 72
    ... Plan allows the Corporation to provide for financing of purchases, subject to certain conditions, by interestbearing notes payable to the Corporation. Prior to the Business Combination, Lockheed and Martin Marietta had also utilized share-based and cash-based incentive award plans. Under the terms...

  • Page 73
    ... the Lockheed Hourly Plans. The Corporation matches an established rate of participating employees' eligible contributions to the Hourly Plans through payments to the ESOP trusts. A portion of the Corporation's match consists of Corporation common stock purchased by the ESOPs on the open market and...

  • Page 74
    ...'s consolidated balance sheet as of December 31: (In millions) 1995 $13,848 Retiree Medical and Life Insurance Plans Certain health care and life insurance benefits are provided to eligible retirees by the Corporation. These benefits are paid by the Corporation or funded through several trusts...

  • Page 75
    ..., the Corporation 1994 8.2-8.5% 8.0-8.8 1993 7.0-7.5% 8.0-8.8 Assumptions: Plan discount rates Expected long-term rate of return on assets 7.5% 8.8 The following table presents the medical trend rates for the plans: 1995 Initial: Lockheed early retirees (pre-65) Lockheed other retirees Martin...

  • Page 76
    ... rates on its operations. The effect of these 74 the development and operation of large, complex information systems; designing, manufacturing and marketing computer graphics products; developing and manufacturing high capacity data storage products; electronics contract manufacturing services...

  • Page 77
    ... operations and receive a fee for performing management services. The Corporation reflects only the management fee in its sales and earnings for these government-owned facilities. In addition, while the employees at such facilities are employees of the Corporation, applicable employee benefit plans...

  • Page 78
    ... earnings (loss) 137 Earnings (loss) per common share, (b) 1.29 1.38 assuming full dilution .62 Space & Strategic Missiles $ 6,025 $ 5,594 $ 6,663 Aeronautics 4,970 4,937 4,274 Information & 2,849 2,885 2,737 Technology Services 2,999 Electronics 3,042 2,418 Energy, Materials 152 118 and Other 168...

  • Page 79
    ... assets related to contracts and programs acquired Cost in excess of net assets acquired Other assets Total Current liabilities-other Current maturities of long-term debt Long-term debt Post-retirement benefit liabilities Other liabilities Stockholders' equity Total Common Shares Outstanding at Year...

  • Page 80
    ... President and Chief Executive Officer, Lockheed Martin Corporation Audit and Ethics Committee Mr. Potter, Chairman. Mrs. King, Messrs. Everett, Flournoy, Hood, Kitchen, Macklin and Ukropina. Gwendolyn S. King Senior Vice President, Corporate and Public Affairs, PECO Energy Company Marcus...

  • Page 81
    ... and Chief Operating Officer, Electronics Sector John S. McLellan Vice President Peter B. Teets Vice President and President and Chief Operating Officer, Information & Technology Services Sector Robert B. Corlett Vice President Frank H. Menaker, Jr. Vice President and General Counsel Peter...

  • Page 82
    ... Plan Lockheed Martin's Dividend Reinvestment and Stock Purchase Plan offers stockholders an opportunity to purchase additional shares through automatic dividend reinvestment and/or voluntary cash investments. For more information, contact our transfer agent, First Chicago Trust Company of New York...

  • Page 83
    ..., of the Audited Consolidated Financial Statements included in this Annual Report and incorporated by reference into the Form 10-K. competition and the sense of responsibility required of a good customer. Shareholders desiring additional information about the Corporation's ethics program may write...

  • Page 84
    Lockheed Martin Corporation 6801 Rockledge Drive Bethesda,MD 20817