Lockheed Martin 1996 Annual Report Download

Download and view the complete annual report

Please find the complete 1996 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 92

  • 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
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92

Table of contents

  • Page 1

  • Page 2
    ... for merger related and consolidation expenses. These charges reduced net earnings by $436 million, or $1.96 per common share assuming full dilution. 16 Space & Strategic Missiles 22 Electronics 30 Information & Services 40 Aeronautics 46 Energy & Environment 50 Financial Section 86 Corporate...

  • Page 3
    ...VentureStar.â„¢ Not only does Lockheed Martin's reusable launch vehicle demonstrator for this program, the X-33, advance the science and technology of space transportation, it's also a bold business solution. By dramatically reducing the cost of getting into space, VentureStar will make it possible...

  • Page 4
    ...of Lockheed Martin's outstanding shares. Add to that, our aggressive stock ownership guidelines for nearly 2,000 individuals in our management ranks; we expect our management team to maintain holdings of two times to five times annual salary, depending on position. Supporting this market performance...

  • Page 5
    ... first F-22 air dominance fighter, which is on track for its first flight in May; conducting the first flight of the C-130J; successful operation of a new air traffic control center in Taiwan; stunning performance of the Advanced Threat Infrared Countermeasures/Common Missile Warning System during...

  • Page 6

  • Page 7
    ... number of civil government and commercial applications. Areas expected to grow in the relatively near term include command, control, communications and intelligence; simulation and training; federal government outsourcing of information systems and services; advanced air traffic control systems...

  • Page 8
    ... of the Department of Energy's Hanford Site, a former plutonium production facility in Washington state. Maneuver Control System - Lockheed Martin will provide the program management and systems integration for a critical part of the Army's futuristic command and control architecture. New Attack...

  • Page 9
    ...a new company with new policies, procedures, standards, organizations, employee benefits - but with almost 200,000 employees ready for action on Day 1. In view of this challenge, the Lockheed Martin team was particularly honored when we were chosen one of the world's 100 best managed corporations in...

  • Page 10
    ...our E-ZPass electronic toll service on six bridges and tunnels connecting New York and New Jersey, just one of many state and local services programs. Lockheed Martin has successfully applied its defense and aerospace technologies to new commercial products and services including medical imaging and...

  • Page 11
    ...fast-moving changes in global markets, technologies, and the geopolitical landscape. Companies that today make up Lockheed Martin were "We believe that there will be significant growth in our commercial markets and that the aerospace and defense industry will continue to consolidate." all once much...

  • Page 12
    ... Company Nashua, NH Information & Services Lockheed M a r t i n Advanced Technology Laboratories Camden, NJ Peter B. Teets President and Chief Operating Officer Lockheed M a r t i n Air Traffic M a n a g e m e n t Rockville, MD Lockheed M a r t i n C o m m e r c i a l Systems Group Orlando, FL...

  • Page 13
    ...Support & Training Services Horsham, PA Lockheed Martin Tactical Aircraft Systems Fort Worth, TX Lockheed Martin Hanford Corp. Richland, WA Lockheed Martin Technical Operations Sunnyvale, CA Lockheed Martin Aeronautical Systems Marietta, GA Lockheed Martin Idaho Technologies Company Idaho Falls...

  • Page 14
    From the Depths of the Oceans to the far Reaches of Space

  • Page 15

  • Page 16

  • Page 17

  • Page 18
    ... program that will be launched to Mars in late 1998 and early 1999. The Space & Strategic Missiles Sector recorded an outstanding number of mission successes in 1996 with its fleet of launch vehicles. In 1996 there were seven Atlas launches serving commercial satellite customers; one Proton launch...

  • Page 19
    ...satellite. Lockheed Martin Astronautics manufactured the launcher and upper stage, and Lockheed Martin Missiles & Space built the satellite for GE Americom. The launch and satellite deployment demonstrate the complementary capabilities of Lockheed Martin companies to offer its customers total system...

  • Page 20
    ...led team to develop the Space Based Infrared System (SBIRS), a next-generation missile warning and tracking system. inherent in Lockheed Martin, which is Center, each with a 12-month delivery cycle - the most efficient production in the industry. Among the outstanding features of the new facility is...

  • Page 21
    ...to-kill technology, a technique pioneered by Lockheed Martin. The Air Force completed four successful test flights of the Peacekeeper intercontinental ballistic missile in 1996, with support from Lockheed Martin Astronautics. Mars Global Surveyor, built by Lockheed Martin Astronautics, was launched...

  • Page 22

  • Page 23
    Lockheed Martin Missiles & Space is involved in critical areas of solar array manufacture for the International Space Station. When deployed, the solar arrays will occupy an acre of space. Missiles & Space is integrating thousands of individual silicon cells onto a flexible backing. The station is ...

  • Page 24
    ... strengthened Electronics' market positions in several areas, including tactical missiles and electro-optic fire control systems, surface ship and submarine combat systems, and radar systems for defense and civil applications. The assets of two non-strategic business units, with product lines in...

  • Page 25
    Sanders, a Lockheed Martin company, and the Space & Strategic Missiles Sector are jointly developing phased array antennae for Astrolink TM satellites. Sanders' Supertile is an array element that offers significant technical, weight and cost advantages over conventional multibeam antennae. When ...

  • Page 26
    ...aircraft. The company also is producing the Air Force Mission Support System for the U.S. Air Force to assist aircrews in flight planning, target area tactics, post-flight analysis and other mission tasks. An industry leader in electronic countermeasures, Sanders continued its successful development...

  • Page 27
    ... Martin's Vertical Launch System product lines and Marine Systems business. Lockheed Martin Federal Systems in Manassas, VA, is leading the way in developing advanced high performance space processing systems for Department of Defense, classified, NASA and commercial applications. In December 1996...

  • Page 28

  • Page 29
    ..., all-weather, day/night antiarmor platform. Manufactured by Lockheed Martin Electronics & Missiles, the Longbow fire control radar, Target Acquisition Designation Sight/Pilot Night Vision Sensor (TADS/PNVS), and Hellfire ll/Longbow missiles provide an integrated system that protects pilots...

  • Page 30
    ... new lightweight launcher for the PAC-3 Missile system in 1996, and is developing the PAC-3 Missile for the U.S. Army under a $700 million contract. Initial fielding of the missile is planned for 1999. Lockheed Martin's broad experience in helicopter avionics and platform integration is demonstrated...

  • Page 31
    ...million order for the AN/TPS-59 (V)3 tactical ballistic missile radar system, the first system of this type to go into production in the U.S. inventory. Lockheed Martin Control Systems, a leading producer of electronic flight controls and engine controls for both commercial and military aircraft, as...

  • Page 32
    ...brought under USA management. During 1996, employees of Lockheed Martin Space Operations and its successor, USA, achieved 100 percent mission success by safely launching and landing seven Space Shuttle missions. In its Commercial Systems business, Information & Services formed a new company, Real 3D...

  • Page 33
    Lockheed Martin Real 3D has developed arcade graphics boards for Sega Enterprises' popular and fastmoving games. This real-time graphics technology is derived from astronaut training and high-performance mission rehearsal simulators for the Air Force. The next move in the commercial marketplace for ...

  • Page 34
    ... millions of motorists around the country quicker and more comfortable by reducing traffic congestion. Electronic toll collection is indicative of the way Lockheed Martin applies its stateof-the-art systems integration capabilities to a wide range of government and commercial products and services.

  • Page 35

  • Page 36
    ... contractor for the Electronic Data Integration and Management initiative at Lockheed Martin's new Commercial Satellite Center in Sunnyvale, CA. Also in 1996, Lockheed Martin solidified its position as a dynamic systems integrator and supplier of advanced technology systems for the civil/commercial...

  • Page 37
    ...advanced laser-based tactical engagement simulation. Lockheed Martin Enterprise Information Systems (EIS) develops internal information systems solutions for the Corporation. EIS has been key to the Lockheed Martin merger process by providing core services such as networks, data center consolidation...

  • Page 38
    ...and civil agencies upgrade their information systems. Services Group will share in the total S3 billion of the program. It is also providing information technology support services at the Department of Energy's Hanford Site in Washington state as part of the winning team that was selected in 1996 to...

  • Page 39
    ... programs, Lockheed Martin Federal Systems is teamed with companies in the Space & Strategic Missiles Sector on the Space Based Infrared System (SBIRS) for the U.S. Air Force, providing the fixed and mobile ground systems for mission data processing, satellite telemetry, tracking and control...

  • Page 40

  • Page 41
    ...worldwide network providing the communications backbone for all agencies of the Department of Defense. Lockheed Martin Western Development Laboratories provided 24 terminals to form the initial Defense Department SATCOM Network. Designed and tested to ensure reliable operation under extreme climates...

  • Page 42
    ... each of its core lines of business: tactical aircraft, airlift, maritime patrol/surveillance, reconnaissance/advanced development programs, modification/ maintenance/logistics and thrust reversers. That leadership manifested itself dramatically in 1996, as Aeronautics won key competitions, achieved...

  • Page 43
    ...and a total of five aircraft were flying in the test program by the end of 1996. Testing has confirmed the superior maneuverability, reliability, cost effectiveness and overall performance of the newest member of the Hercules family of transport aircraft. Manufactured by Lockheed Martin Aeronautical...

  • Page 44
    ... demonstration, the F-16 continuing to attract new sales and with the new programmed depot maintenance and advanced systems upgrade work we secured on the F-l 17 program, 1996 is the year we recognized the Aeronautics Sector as the home of Lockheed Martin's "Fighter Enterprise." aircraft. Sales...

  • Page 45
    ... aircraft components plant in Charleston, SC. Meanwhile, the Aeronautics Sector said it would establish a Center of Excellence for sheet metal manufacturing in Pinellas County, FL. Also in October, the Aeronautics Sector announced that it would consolidate several operating companies doing business...

  • Page 46
    The F-22 air dominance fighter is a critical U.S. Air Force program. In 1996, major milestones were successfully met in F-22 construction when the wings, forward, mid and aft fuselages were mated. Lockheed Martin Aeronautical Systems and Lockheed Martin Tactical Aircraft Systems are building this ...

  • Page 47

  • Page 48
    ... Y-12 plant which is managed by Lockheed Martin Energy Systems. The Idaho National Engineering and Environmental Laboratory (INEEL) and Lockheed Martin Idaho Technologies, which operates the lab for the Department of Energy, are engaged in some of the most advanced agricultural research in the world...

  • Page 49
    Scientists at Oak Ridge National Laboratory, with funding from the Department of Energy and National Science Foundation, study the effect of concentrations of carbon dioxide and other so-called greenhouse gases on a forested ecosystem. The research should provide insight, for example, into how ...

  • Page 50
    ... case of technology transfer after the Cold War. First developed as the tiny components of locks to safeguard nuclear weapons, they now are applied to a variety of commercial products. Microscopic gears and drives may be incorporated into automobile airbags or used to power an artificial heart.

  • Page 51
    ... state. The team is tasked with cleaning Hanford's vast underground storage tanks under the Tank Waste Remediation System program. Representing the first Department of Energy privatization contract in Washington state, Lockheed Martin Advanced Environmental Systems will prepare the one-time nuclear...

  • Page 52
    ... Section Management's Discussion and Analysis of Financial Condition and Results of Operations 51 The Corporation's Responsibility for Financial Reporting 64 Report of Ernst & Young LLP, Independent Auditors 65 Consolidated Statement of Earnings 66 Consolidated Statement of Cash Flows 67...

  • Page 53
    ...of Financial Condition and Results of Operations Lockheed Martin Corporation (Lockheed Martin or the Corporation) is a highly diversified global enterprise principally engaged in the conception, research, design, development, manufacture and integration of advanced-technology products and services...

  • Page 54
    ... business units. As a result, the Corporation's operations are now divided into five business segments: Space & Strategic Missiles; Electronics; Information & Services; Aeronautics; and Energy, Materials and Other. The operations of Tactical Systems have been reflected, for 1996 segment reporting...

  • Page 55
    ...formation of Lockheed Martin. During the second quarter of 1995, the Corporation recorded a pretax charge of $525 million in conjunction with a corporate-wide consolidation plan under which the Corporation would close certain facilities and laboratories and eliminate duplicative field offices in the...

  • Page 56
    ... share. However, the 1996 reported amounts include the after-tax effects of the Materials exchange and the provision for the after-tax effect of the Corporation's divestiture of its Armament Systems and Defense Systems business units which were sold to General Dynamics Corporation (General Dynamics...

  • Page 57
    .... Since 1993, the Corporation has made several strategic acquisitions and alliances which affect many facets of its business, including tactical military aircraft production, space launch systems and defense and commercial electronics. These acquisitions are examples of actions that have broadened...

  • Page 58
    ... of competing products, technological feasibility, product obsolescence and the risks inherent in conducting business internationally. Discussion of Business Segments (In millions) Net Sales Space & Strategic Missiles Electronics Information & Services Aeronautics Energy, Materials and Other 1996...

  • Page 59
    ... with the industry segment information contained in Note 15 to the consolidated financial statements. (In millions) 1996 1995 1994 Operating Profit, Excluding Nonrecurring Items Space & Strategic Missiles Electronics Information & Services Aeronautics Energy, Materials and Other $ 998...

  • Page 60
    ... production programs. Information & Services - Net sales of the Information & Services segment increased by 40 percent in 1996 compared to 1995 due to the inclusion of the operations of certain Tactical Systems companies since April 1, 1996. Excluding the operations of the Tactical Systems companies...

  • Page 61
    ...42,232 Total Space & Strategic Missiles backlog increased by eight percent in 1996 compared to 1995 and by two percent in 1995 compared to 1994. The increase in 1996 occurred principally from new orders received for Titan, Atlas and Proton launch vehicle services and the SBIRS program. The increase...

  • Page 62
    ..., plant and equipment, net of purchased operations, were 47 percent higher in 1996 compared to 1995, reflecting the inclusion of the capital spending activity of the Tactical Systems business units as well as approximately $150 million related to the Lockheed Martin integration and consolidation...

  • Page 63
    ..., the Amended 5-Year Credit Facility supports commercial paper borrowings of approximately $2.4 billion outstanding at December 31, 1996. Of this amount, $1.25 billion has been classified as long-term debt in the Corporation's consolidated balance sheet based on management's ability and intention to...

  • Page 64
    ... that, subject to prevailing financial, market and economic conditions, the Corporation may divest other non-core businesses or surplus properties. The pending transaction with Newco, which management estimates will generate cash in excess of $400 million, is expected to close during the first half...

  • Page 65
    Lockheed Martin Corporation unlikely event that the Corporation were required to fund the entire cost of such remediation, the statutory framework provides that the Corporation may pursue rights of contribution from the other PRPs. Among the variables management must assess in evaluating costs ...

  • Page 66
    ... a strong ethical climate. Management has issued written policy statements which document the Corporation's business code of ethics. The importance of ethical behavior is regularly communicated to all employees through the distribution of written codes of ethics and standards of business conduct and...

  • Page 67
    ...the accompanying consolidated balance sheet of Lockheed Martin Corporation as of December 31, 1996 and 1995, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the...

  • Page 68
    ...Lockheed Martin Corporation (In millions, except per share data) 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 and cumulative effect of change in accounting...

  • Page 69
    Consolidated of Cash Flows Statement Lockheed Martin Corporation (In millions) Operating Activities Earnings before cumulative effect of change in accounting Adjustments to reconcile earnings to net cash provided by operating activities: Merger related and consolidation-expenses -payments ...

  • Page 70
    Consolidated Balance Sheet Lockheed Martin Corporation December 31, (In millions) Assets Current assets: Cash and cash equivalents Receivables Inventories Deferred income taxes Other current assets Total current assets Property, plant and equipment Intangible assets related to contracts and ...

  • Page 71
    Consolidated Statement of Stockholders' Equity Lockheed Martin Corporation (In millions) Balance at December 31,1993 Earnings before cumulative effect of change in accounting Cumulative effect of change in accounting Dividends declared on preferred stock ($3.00 per share) Dividends declared on ...

  • Page 72
    ... 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, electronics, and information systems. The...

  • Page 73
    ...standard was not material to the Corporation's consolidated earnings or financial position. Also in 1996, the Corporation adopted SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 allows companies to continue to measure compensation cost for stockbased employee compensation plans...

  • Page 74
    ... Corporation of Loral's defense electronics and systems integration businesses (collectively, the Loral Transaction). In accordance with the terms of the Tender Offer and the Loral Merger Agreement, on April 23, 1996, LAC purchased approximately 94.5 percent of the outstanding shares of common stock...

  • Page 75
    ... reassigned management responsibility for certain business units. As a result, the Corporation's operations are now divided into five business segments. The operations of Tactical Systems have been reflected, for 1996 segment reporting purposes, in the Electronics, Information & Services, and Energy...

  • Page 76
    ...included in costs and expenses in 1996, 1995 and 1994 were general and administrative costs, including research and development costs, of approximately $574 million, $320 million and $223 million, respectively, incurred by commercial business units or programs. 5.0% 6.0-11.4% - 91 10,368 (180) $10...

  • Page 77
    ... Amended 5-Year Credit Facility supports commercial paper borrowings of approximately $2.4 billion outstanding at December 31, 1996, of which approximately $1.25 billion has been classified as long-term debt in the Corporation's consolidated balance sheet based on management's ability and intention...

  • Page 78
    ... to exchange each Lockheed Martin common share held for 4.72 common shares of Materials on a tax-free basis. The Exchange Offer expired by its terms on October 18, 1996 and was oversubscribed. On October 23, 1996, approximately 7.9 million shares of the Corporation's common stock were exchanged for...

  • Page 79
    ... these programs; no shares were repurchased in 1996. S t o c k o p t i o n a n d a w a r d p l a n s - On March 15, 1995, the stockholders approved the Lockheed Martin 1995 Omnibus Performance Award Plan (Omnibus Plan). Under the Omnibus Plan, employees of the Corporation may be granted stock-based...

  • Page 80
    ...-Retirement Benefit Plans The Corporation maintains separate plans for post-retirement benefits for its employees based on their association with the former heritage companies of Lockheed and Martin Marietta, and with Tactical Systems. Defined Contribution Plans The Corporation maintains a number...

  • Page 81
    ... dates. 1996 Assumptions: Discount rates Expected long-term rate of return on assets 7.8% 9.0 1995 7.5% 8.8 1994 8.2-8.5% 8.0-8.8 Retiree Medical A n d Life Insurance Plans Certain health care and life insurance benefits are provided to eligible retirees by the Corporation. These benefits are paid...

  • Page 82
    ...over their remaining terms will be approximately $110 million. The Corporation has also been operating under a cleanup and abatement order from the California Regional Water Quality Control Board affecting its facilities in Burbank, California. This order requires site assessment and action to abate...

  • Page 83
    ... only the management fee in its sales and earnings for these government-owned facilities. In addition, while the Selected Financial D a t a By Business S e g m e n t (In millions) Net sales Space & Strategic Missiles Electronics Information & Services Aeronautics Energy, Materials and Other 1996...

  • Page 84
    ...to Consolidated Financial Statements Continued (In millions) Expenditures for property, plant and equipment Space & Strategic Missiles Electronics Information & Services Aeronautics Energy, Materials and Other 1996 1995 1994 Export sales were $4.7 billion, $3.7 billion and $3.6 billion in 1996...

  • Page 85
    ...Tactical Systems. Pursuant to SEC disclosure requirements, summarized consolidating financial information follows: (In millions) Earnings Data For the year ended December 31, 1996 Net sales Earnings from operations Net earnings For the year ended December 31, 1995 Net sales Earnings from operations...

  • Page 86
    ... to Consolidated Financial Statements Continued Lockheed Martin Corporation (In millions) Balance Sheet Data As of December 31, 1996 Current assets Noncurrent assets Current liabilities -Public -Affiliated (c) -Public -Affiliated (c) -Public -Affiliated (c) Lockheed Martin'(a) Tactical Systems...

  • Page 87
    ... $ Cash Dividends Condensed Balance 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 Current liabilities-other Short-term borrowings Current maturities of long-term debt Long...

  • Page 88
    ... Policy Research, American Enterprise Institute Bernard L. Schwartz Chairman and Chief Executive Officer, Loral Space & Communications Ltd. Vance D. Coffman President and Chief Operating Officer, Lockheed Martin Corporation Daniel M. Tellep Retired Chairman and Chief Executive Officer, Lockheed...

  • Page 89
    ... President Philip J. Duke Vice President Frank H. Menaker, Jr. Senior Vice President and General Counsel Peter B. Teets Vice President and President and Chief Operating Officer, Information & Services Sector John F. Egan Vice President John E. Montague Vice President Ronald R. Finkbiner Vice...

  • Page 90
    ... Stock symbol: LMT Listed: New York Dividend Reinvestment 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...

  • Page 91
    ...-K. Shareholders desiring to read "Setting the Standard, Lockheed Martin's Code of Ethics and Business Conduct" or obtain additional information about the Corporation's ethics program may visit the Lockheed Martin Home Page on the World Wide Web: http://www.lmco.com or write to the Corporation care...

  • Page 92
    Lockheed M a r t i n Corporation 6 8 0 1 Rockledge Drive Bethesda, M D 2 0 8 1 7