Lockheed Martin 1996 Annual Report Download - page 78

Notes to Consolidated Financial Statements
Continued
The primary components of the Corporation's federal
deferred income tax assets and liabilities at December 31 were
as follows:
Federal and foreign income tax payments, net of refunds
received, were $1.1 billion in 1996, $223 million in 1995 and $502
million in 1994.
Note 10 — Other Income and Expenses
Other income and expenses, net, consisted of the following
components:
(In millions)
Royalty income
Interest income
Materials transactions
Acquisition termination fee
Other
1996
$ 47
60
365
—
(20)
$452
1995
$64
33
—
—
(2)
$95
1994
$ 59
34
118
50
(61)
$200
During the third quarter of 1996, the Corporation announced
its intention to distribute via an exchange offer its remaining
81 percent interest in Martin Marietta Materials, Inc. (Materials)
to its stockholders (the Exchange Offer). Under the terms of the
Exchange Offer, the Corporation's stockholders were given the
opportunity 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
the 37.35 million shares of Materials common stock held by the
Corporation. Upon the closing of this transaction, the Corporation
had no remaining ownership interest in Materials and had reduced
its common shares outstanding by approximately 4 percent.
This fourth quarter, 1996 exchange was accounted for at fair
value, resulting in the reduction of the Corporation's stockholders'
equity by $750 million and the recognition of a pretax gain of
$365 million.
In November, 1996, the Corporation announced the proposed
divestiture of two of its business units, Defense Systems and
Armament Systems. This transaction, which concluded with the
Corporation's receipt of $450 million in cash on January 2, 1997,
had no pretax effect on the results of operations for 1996. At
December 31, 1996, $450 million, representing the net assets of the
two business units, is included in other current assets.
On a combined basis, the Materials exchange and divestiture
noted above increased net earnings by $351 million, or $1.58 per
common share assuming full dilution.
In February 1994, Materials sold through an initial public
offering (IPO) approximately 8.8 million shares, or 19% of its com-
mon stock. A portion of the proceeds from the offering was used to
defease in substance certain long-term debt. The Corporation rec-
ognized a pretax gain, net of a loss on debt defeasance, of $118 mil-
lion from the Materials IPO. The net after-tax gain from these
transactions was $70 million, or $.32 per common share assuming
full dilution.
During March 1994, the Corporation entered into an
Agreement and Plan of Merger with Grumman Corporation
(Grumman) which was subsequently terminated by Grumman.
In April 1994, the Corporation received $50 million plus reim-
bursement of expenses pursuant to the termination provisions of
the Agreement and Plan of Merger. The Corporation recorded an
after-tax gain of $30 million, or $.14 per common share assuming
full dilution.
Note 11 — Stockholders' Equity
and Related Items
Capital structure — The authorized capital of the
Corporation is composed of 750 million shares of common stock
(192.7 million shares issued), 50 million shares of series preferred
stock (no shares issued), and 20 million shares of Series A pre-
ferred stock (20 million shares issued). Approximately 70 million
common shares have been reserved for issuance under benefit and
incentive plans.
The Series A preferred stock has a par value of $1 per share
(liquidation preference of $50 per share). The Corporation issued
all of the authorized and outstanding shares of Series A preferred
stock to General Electric Company (GE) in 1993 in connection with
the acquisition of the GE Aerospace businesses. Dividends are
cumulative and paid at an annual rate of $3.00 per share, or 6%.
The shares held by GE are currently convertible into approximately
13% of the shares of the Corporation's common stock after giving
effect to such conversion, have an aggregate liquidation preference
of $1 billion, and are nonvoting except in special circumstances.
76
(In millions)
Deferred tax assets related to:
Accumulated post-retirement
benefit obligations
Accrued compensation and benefits
Merger related and
consolidation reserves
Contract accounting methods
Other
Deferred tax liabilities related to:
Intangible assets
Prepaid pension asset
Property, plant and equipment
Net deferred tax assets
1996
$ 700
333
217
619
180
2,049
486
297
178
961
$1,088
1995
$554
223
168
165
137
1,247
365
89
213
667
$ 580