Lockheed Martin 1996 Annual Report Download - page 74

Notes to Consolidated Financial Statements
Continued
shares of capital stock in Loral Space & Communications, Ltd.
(Loral SpaceCom), a newly-formed company, which now owns and
manages substantially all of Loral's former space and satellite
telecommunications interests, and (ii) the acquisition by the
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 approxi-
mately 94.5 percent of the outstanding shares of common stock of
Loral. Subsequent to the consummation of the Tender Offer, on
April 29, 1996, LAC merged with and into Loral and each remaining
share of common stock of Loral not owned by LAC was converted
into the right to receive $38. Each outstanding share of common
stock of LAC was converted into shares of common stock of Loral,
and Loral changed its name to Lockheed Martin Tactical Systems,
Inc. (Tactical Systems). As a result of these transactions, Tactical
Systems became a wholly-owned subsidiary of the Corporation.
The operations of Tactical Systems have been included in the results
of operations of the Corporation from April 1, 1996.
In connection with the above transactions, the Corporation
acquired shares of preferred stock of Loral SpaceCom that were
convertible into 20 percent of Loral SpaceCom's common stock
on a fully diluted basis at the acquisition date. The Corporation's
ownership of the preferred stock of Loral SpaceCom is subject
to certain limitations and restrictions set forth in the terms and
conditions of the preferred stock and in agreements between the
Corporation and Loral SpaceCom.
The total purchase price paid with respect to the above trans-
actions, including acquisition costs, was approximately $7.6 billion.
The Loral Transaction has been accounted for using the purchase
method of accounting. Purchase accounting adjustments have been
recorded to allocate the purchase price to assets acquired and lia-
bilities assumed based on fair values at the date of acquisition. A
summary of assets acquired and liabilities assumed follows:
The following unaudited pro forma combined earnings data
presents the results of operations of the Corporation and Tactical
Systems for the years ended December 31, 1996 and 1995, as if the
Loral Transaction had been consummated as of the beginning of
the periods presented. This pro forma combined earnings data does
not purport to be indicative of results of operations that would have
resulted if the Loral Transaction had occurred on the applicable
dates indicated above. Moreover, this data is not intended to be
indicative of future results of operations.
(In millions, except per share data)
Pro forma net sales
Pro forma net earnings
Pro forma earnings per common share:
Assuming no dilution
Assuming full dilution
1996
$28,235
1,356
6.85
6.08
1995
$28,859
572
2.71
2.56
The funds for the consummation of the Loral Transaction
were provided through the issuance of commercial paper by the
Corporation and through borrowings under revolving credit facili-
ties with a syndicate of commercial banks. These credit facilities
consisted of a 364-day unsecured revolving credit facility in the
amount of $5 billion (the Short-Term Credit Facility) and a 5-year
unsecured revolving credit facility in the amount of $5 billion (the
5-Year Credit Facility). In connection with the establishment of
these credit facilities, the Corporation and Loral each terminated
their previously existing revolving credit facilities. Approximately
$6.6 billion of commercial paper was issued and approximately
$1 billion was borrowed under the 5-Year Credit Facility to finance
the Loral Transaction on the closing date. During the second
quarter of 1996, the Corporation issued $5 billion of debt securi-
ties. The net proceeds from the sale of the debt securities were
used to repay the $1 billion borrowed under the 5-Year Credit
Facility and to reduce the amount of commercial paper outstand-
ing. On July 26, 1996, the Corporation terminated the Short-Term
Credit Facility. The Corporation amended its 5-Year Credit Facility
on December 20, 1996. (See Note 8.)
Note 3 — Repositioning of Non-Core Businesses
and New Organizational Structure
On January 31, 1997, the Corporation entered into a memorandum
of understanding under which certain of its non-core business units
will be repositioned as a new independent company. These busi-
ness units, which are primarily composed of high-technology,
product-oriented companies, contributed approximately 2% of the
Corporation's 1996 consolidated net sales. The Corporation will
retain a 34.9% interest in the new company.
The proposed transaction is subject to the parties entering into
a mutually acceptable definitive purchase agreement, regulatory
approvals, and other customary conditions, and is expected to close
during the first half of 1997.
72
(In millions)
Working capital, excluding cash acquired
Property, plant and equipment
Intangible assets related to contracts and
programs acquired
Cost in excess of net assets acquired
Other assets
Long-term debt
Post-retirement benefit liabilities
Other liabilities
Net investment
Cash acquired
Total cost of acquisition
$ (805)
1,073
440
8.045
1,110
(1,857)
(464)
(198)
7,344
277
$ 7,621