Lockheed Martin 2000 Annual Report Download

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In A World That Demands Information Superiority…
Annual Report 2000

Table of contents

  • Page 1
    Annual Report 2000 In A World That Demands Information Superiority...

  • Page 2
    ... of Financial Condition and Results of Operations on pages 23 through 41 of this Annual Report. Contents To Our Shareholders Financial Section Corporate Directory General Information 44 22 72 74 On The Cover: In a world that increasingly demands information superiority, Lockheed Martin applies...

  • Page 3
    Lockheed Martin Applies Its Vision, Its Purpose And Its Values To Customer Priorities Our Vision: â- To be the world's best advanced technology systems integrator. To achieve Mission Success by attaining total customer satisfaction and meeting all our commitments. Ethics Excellence "Can-Do'' ...

  • Page 4
    ... Vice President, Lockheed Martin Aeronautics Co.; Albert E. Smith, Executive Vice President, Lockheed Martin Space Systems Co.; John V. Sponyoe, Lockheed Martin Global Telecommunications Chief Executive Officer; Michael F. Camardo, Executive Vice President, Lockheed Martin Technology Services. 2 3

  • Page 5
    ... was achieved mainly through the reduction of days working capital as we focused on the management of receivables, customer advances, payables and inventory throughout all our business areas. By combining free cash flow with the $2 billion of cash proceeds from our divestitures, we reduced...

  • Page 6
    ... aircraft set new performance standards for a flight-test program, and we look forward to a successful JSF program in 2001. As proven performers, Lockheed Martin aircraft, like the F-16 tactical fighter and C-130J airlifter, serve the strategic interests of America and its allies. The U.S. Air Force...

  • Page 7
    ... computing centers. In addition, CSOC delivered the new Training Flight Control room in just six months-ahead of schedule and within budget. As systems integrators, our team was instrumental in tallying the Year 2000 Census with an accuracy rate of 99.8%. Lockheed Martin's Data Capture System (DCS...

  • Page 8
    ... companies combined. Lockheed Martin is committed to excellence-to be the company that customers around the world trust most to work with them on their vitally important projects. Our vision recognizes that our core expertise is systems integration-working with governments and commercial customers...

  • Page 9
    ... System Replacement (DSR) installations at Federal Aviation Administration facilities across the nation. The program was completed ahead of schedule and within budget. In recognition of our customer-focused approach to air traffic management solutions and advanced technologies, Lockheed Martin Air...

  • Page 10
    Innovation In Technology And Business Helping customers focus on their core competencies. Lockheed Martin's Science, Engineering, Analysis, and Test (SEAT) operation is a leading engineering and scientific support services contractor to NASA at the Johnson Space Center (JSC). For more than three ...

  • Page 11
    ...a partnership of Lockheed Martin, BAE SYSTEMS plc, Boeing Co., and Raytheon Co. The goal: To streamline and modernize our procurement systems as well as lower costs to our customers. That same commitment to lowering costs is evident in our new Shared Services team which consolidates and rationalizes...

  • Page 12
    ... in over 30 countries. In its global approach to business, Lockheed Martin's goals are to establish and maintain enduring international partnerships with governments and advanced technology companies around the world, and to be seen as their international partner of choice. With 300 partnerships in...

  • Page 13
    ...1993 and 2000 Atlas launchers have flown a total of 54 consecutive successful missions. Lockheed Martin seeks to establish a long-term presence, earn the trust of customers, and match corporate breadth and depth with customer priorities. maintenance and modification services for Argentine Air Force...

  • Page 14
    ...'s Discussion and Analysis of Financial Condition and Results of Operations The Corporation's Responsibility for Financial Reporting Report of Ernst & Young LLP, Independent Auditors Audited Consolidated Financial Statements: Consolidated Statement of Operations Consolidated Statement of Cash Flows...

  • Page 15
    ... (Lockheed Martin or the Corporation) is engaged in the conception, research, design, development, manufacture, integration and operation of advanced technology systems, products and services. The Corporation serves customers in both domestic and international defense and commercial markets...

  • Page 16
    ... estimated life of 30 years. The operations of COMSAT have been consolidated with the results of operations of LMGT since August 1, 2000. Given the substantial investment necessary for the growth of the global telecommunications services business, support from strategic partners for the Corporation...

  • Page 17
    ... The Corporation's primary lines of business are in advanced technology systems, products and services for aerospace and defense, serving both government and commercial customers. In recent years, domestic and worldwide political and economic developments have strongly affected these markets...

  • Page 18
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Lockheed Martin Corporation December 31, 2000 as evidenced by the acquisition in 2000 of the Corporation's AES and Control Systems businesses by a U.S. subsidiary of BAE SYSTEMS plc. There are signs that the ...

  • Page 19
    ...the Corporation's business or its consolidated results of operations, cash flows or financial position. The Corporation also conducts business in related commercial and non-defense markets. Although these lines of business are not dependent on defense budgets, they share many of the risks associated...

  • Page 20
    ... two Russian government-owned space firms to form Lockheed-Khrunichev-Energia International, Inc. (LKEI). Lockheed Martin owns 51 percent of LKEI and consolidates the operations of LKEI into its financial statements. LKEI has exclusive rights to market launches of commercial, nonRussian-origin space...

  • Page 21
    ...: Effects of nonrecurring and unusual items: Operating (loss) profit Net (loss) earnings (Loss) earnings per diluted share $24,000 $18,000 (In millions) $12,000 $6,000 $0 '00 '99 '98 Results of Operations The Corporation's operating cycle is long-term and involves many types of production...

  • Page 22
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Lockheed Martin Corporation December 31, 2000 The note references in the preceding table refer to the Notes to Consolidated Financial Statements included in this Annual Report. Excluding the effects of these ...

  • Page 23
    ... Systems, Aeronautics, Technology Services and Global Telecommunications. All other activities of the Corporation fall within the Corporate and Other segment. The following tables of financial information and related discussions of the results of operations of the Corporation's business segments...

  • Page 24
    ... related to the AES and Control Systems businesses due to their divestiture in 2000. Also during 2000, increases in operating profit attributable to the THAAD program's movement into the EMD phase, as well as the absence in 2000 of a $15 million penalty recorded on that program in the second quarter...

  • Page 25
    Lockheed Martin Corporation (Continued) on military satellite programs and classified activities. Net sales were also reduced by a $185 million decrease in commercial and civil satellite activities as a result of the maturity of certain programs and lower market demand. Net sales were further ...

  • Page 26
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Lockheed Martin Corporation December 31, 2000 favorable progress occurs in terms of orders and cost. Of the remaining decrease in 1999 operating profit, $80 million resulted from reduced F-16 deliveries, with the ...

  • Page 27
    ... of the decrease in 2000 operating profit was due to the expensing of start-up costs associated with the Corporation's e-commerce investment and the absence in 2000 of a favorable adjustment recorded by the segment's Communications Industry Services line of business in the first quarter of 1999. The...

  • Page 28
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Lockheed Martin Corporation December 31, 2000 and decreases in new orders on Command, Control, Communications, Computers and Intelligence (C4I) programs. Approximately one half of the 1999 increase from 1998 was ...

  • Page 29
    Lockheed Martin Corporation (Continued) Net Cash Provided By Operating Activities (In millions) $2,500 previously under the caption "Divestiture Activities," the Corporation's sale of its AES and Control Systems businesses, as well as the sale of a portion of its investment in Inmarsat, generated ...

  • Page 30
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Lockheed Martin Corporation December 31, 2000 financing activities in 1999 as compared to the cash used during 1998 reflects the Corporation's issuance of $3.0 billion in long-term debt securities in the fourth ...

  • Page 31
    ... reduce debt and invest in its core businesses, management anticipates that, subject to prevailing financial, market and economic conditions, the Corporation may continue to divest certain non-core businesses, passive equity investments and surplus properties. In connection with the UAE's order for...

  • Page 32
    ...matters in which an estimate of financial exposure could be determined. Management believes, however, that it is unlikely that any additional liability the Corporation may incur for known environmental issues would have a material adverse effect on its consolidated results of operations or financial...

  • Page 33
    ...Corporation's financial instruments which are subject to interest rate risk principally include variable rate commercial paper and fixed rate long-term debt. The Corporation's long-term debt obligations are generally not callable until maturity. The Corporation may use interest rate swaps to manage...

  • Page 34
    ...customers, including the U.S. Government. The importance of ethical behavior is regularly communicated to all employees through the distribution of the Code of Ethics and Business Conduct, and through ongoing education and review programs designed to create a strong compliance environment. The Audit...

  • Page 35
    REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Lockheed Martin Corporation Board of Directors and Stockholders Lockheed Martin Corporation We have audited the accompanying consolidated balance sheet of Lockheed Martin Corporation as of December 31, 2000 and 1999, and the related consolidated ...

  • Page 36
    CONSOLIDATED STATEMENT OF OPERATIONS Lockheed Martin Corporation Year ended December 31, (In millions, except per share data) 2000 $25,329 23,715 1,614 (409) 1,205 919 286 710 (424) (95) - $ (519) $ 1999 $25,530 23,865 1,665 344 2,009 809 1,200 463 ...

  • Page 37
    ... Inventories Customer advances and amounts in excess of costs incurred Income taxes Other Net cash provided by operating activities Investing Activities Expenditures for property, plant and equipment AES Transaction Sale of Control Systems business Sale of shares of Inmarsat COMSAT Tender Offer Sale...

  • Page 38
    CONSOLIDATED BALANCE SHEET Lockheed Martin Corporation December 31, (In millions) 2000 1999 Assets Current assets: Cash and cash equivalents Receivables Inventories Deferred income taxes Other current assets Total current assets Property, plant and equipment Investments in equity securities ...

  • Page 39
    CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Lockheed Martin Corporation (In millions, except per share data) Common Stock Additional Paid-In Capital Retained Earnings Unearned ESOP Shares Accumulated Other Comprehensive Loss Total Stockholders' Equity Comprehensive Income (Loss) Balance ...

  • Page 40
    ... Accounting Policies Organization-Lockheed Martin Corporation (Lockheed Martin or the Corporation) is engaged in the conception, research, design, development, manufacture, integration and operation of advanced technology systems, products and services. Its products and services range from...

  • Page 41
    ... are recorded as costs are incurred. Applicable estimated profits are included in earnings in the proportion that incurred costs bear to total estimated costs. Sales of products and services provided essentially under commercial terms and conditions are recorded upon shipment or completion of...

  • Page 42
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Lockheed Martin Corporation December 31, 2000 Research and development and similar costs-Corporationsponsored research and development costs primarily include research and development and bid and proposal efforts related to government products and services...

  • Page 43
    ...as of the acquisition date follows: (In millions) Working capital, excluding cash acquired Property, plant and equipment Investments in equity securities Cost in excess of net assets acquired Other assets Long-term debt Post-retirement benefit liabilities Deferred income taxes Other liabilities Net...

  • Page 44
    ... to the estimated effects of interest on the debt to finance the Tender Offer which was, for purposes of this pro forma presentation, assumed to have been issued on January 1, 1999. The Corporation has consolidated the operations of COMSAT with the results of operations of Lockheed Martin Global...

  • Page 45
    ... the estimated effects of exiting non-strategic lines of business and impairment in the values of various non-core investments and certain other assets, and included estimated costs for facility closings and transfers of programs related to the Corporation's acquisition of Loral Corporation in...

  • Page 46
    ... TO CONSOLIDATED FINANCIAL STATEMENTS Lockheed Martin Corporation December 31, 2000 of business in the area of children and family services. In 1999, the Corporation recorded an additional charge of approximately $40 million related to these remaining initiatives. The estimated costs related to...

  • Page 47
    Lockheed Martin Corporation (Continued) Note 6-Receivables (In millions) (Atlas V) programs. At December 31, 2000 and 1999, 2000 $ 1,143 2,289 (457) 725 $ 1999 927 2,300 (395) 644 commercial launch vehicle inventories included amounts advanced to Russian manufacturers, Khrunichev State Research ...

  • Page 48
    ... quarter of 2000, the Corporation recorded a nonrecurring and unusual charge, net of state income tax benefits, of $117 million related to impairment of its investment in ACeS International, Ltd. (ACeS) due to an other than In November 2000, the Corporation commenced tender offers for the purchase...

  • Page 49
    ... value, have an effective yield of 13.25%. A leveraged employee stock ownership plan (ESOP) incorporated into the Corporation's salaried savings plan borrowed $500 million through a private placement of notes in 1989. These notes are being repaid in quarterly installments over terms ending in 2004...

  • Page 50
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Lockheed Martin Corporation December 31, 2000 amount of approximately $9.9 billion. 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 ...

  • Page 51
    ... with other awards. The Omnibus Plan requires that options to purchase common stock have an exercise price of not less than 100 percent of the market value of the underlying stock on the date of grant. The number of shares of Lockheed Martin common stock reserved for issuance under the Omnibus...

  • Page 52
    ... accordance with the applicable COMSAT stock option agreements), and became an option, on the same terms and conditions, to purchase one share of Lockheed Martin common stock. A total of 4.3 million COMSAT stock options were outstanding at the Merger date. Included in the total purchase price of the...

  • Page 53
    ... under the Omnibus Plan have 10 year terms and generally vest over a two year service period. Exercise prices of options awarded in those years were equal to the market price of the stock on the date of grant. Pro forma information regarding net earnings and earnings per share as required by SFAS...

  • Page 54
    ... stock at December 31, 2000. Dividends paid to the salaried and hourly ESOP trusts on the allocated shares are paid annually by the ESOP trusts to the participants based upon the number of shares allocated to each participant. Defined benefit pension plans, and retiree medical and life insurance...

  • Page 55
    ... provisions relating to the protection of the environment. In the opinion of management and in-house counsel, the probability is remote that the outcome of these matters will have a material adverse effect on the Corporation's consolidated results of operations or financial position. These matters...

  • Page 56
    ... Lockheed Martin Corporation December 31, 2000 Environmental matters-The Corporation is responding to three administrative orders issued by the California Regional Water Quality Control Board (the Regional Board) in connection with the Corporation's former Lockheed Propulsion Company facilities...

  • Page 57
    ...equitable sharing of the risks associated with the Pit 9 project. The Corporation has been unsuccessful in reaching any agreements with the DOE on cost recovery or other contract restructuring matters. In June 1998, the DOE, through Lockheed Martin Idaho Technologies Company (LMITCO), its management...

  • Page 58
    ... and commercial satellites; and research, development, engineering and science in support of nuclear weapons stewardship and naval reactor programs. Global Telecommunications-Provides communications services and advanced technology solutions through three lines of business: enterprise solutions...

  • Page 59
    ... operating profit (loss) Systems Integration Space Systems Aeronautics Technology Services Global Telecommunications Corporate and Other $(304) 25 - (34) (117) (109) $(539) $ 13 21 - - - 215 $249 $ 4 - - - - (166) $ 1,413 $ 1,398 $ 1,320 Expenditures for property, plant and equipment Systems...

  • Page 60
    ... - - $18,309 U.S. Government Systems Integration Space Systems Aeronautics Technology Services Global Telecommunications Corporate and Other Net sales Earnings from operations Earnings (loss) before extraordinary item Net earnings (loss) Diluted earnings (loss) per share before extraordinary item...

  • Page 61
    Lockheed Martin Corporation (Continued) (In millions, except per share data) 1999 Quarters First(f) $6,188 487 Second(g) $6,203 131 Third(h) $6,157 488 Fourth(i) $6,982 559 Net sales Earnings from operations Earnings (loss) before cumulative effect of change in accounting Net (loss) earnings ...

  • Page 62
    ... Sheet Data Current assets Property, plant and equipment Intangible assets related to contracts and programs acquired Cost in excess of net assets acquired Other assets Total Short-term borrowings Current maturities of long-term debt Other current liabilities Long-term debt Post-retirement benefit...

  • Page 63
    CONSOLIDATED FINANCIAL DATA-FIVE YEAR SUMMARY Lockheed Martin Corporation (Continued) Notes to Five Year Summary (a) Reflects the business combination with COMSAT Corporation effective August 2000. Includes the effects of nonrecurring and unusual items which, on a combined basis, decreased pretax ...

  • Page 64
    ...Alliance Capital Management International Audit and Ethics Committee Mrs. King, Chairman Messrs. Gibbons, Hurtt, Savage, Ukropina and Yearley Marcus C. Bennett Retired Executive Vice President Lockheed Martin Corporation Robert J. Stevens President and Chief Operating Officer Executive Committee...

  • Page 65
    ... President and Chief Operating Officer Christopher E. Kubasik Vice President and Chief Financial Officer Acting Controller Robert H. Trice, Jr. Vice President Brian D. Dailey Vice President Lillian M. Trippett Vice President, Corporate Secretary and Associate General Counsel Richard W. Dessling...

  • Page 66
    ... more information about Lockheed Martin Direct Invest, contact our transfer agent, First Chicago Trust Company at 1-800-519-3111, or to view plan materials online and enroll electronically, access Internet site http://www.shareholder.com/lmt/services.htm#drip. Independent Auditors Ernst & Young LLP...

  • Page 67
    ...risks related to international transactions and global needs for military and commercial aircraft and electronic systems and support; domestic and international telecommunications regulatory developments; market conditions and other factors affecting the value of the Corporation's equity investments...

  • Page 68
    Lockheed Martin Corporation 6801 Rockledge Drive Bethesda, MD 20817 www.lockheedmartin.com