Lockheed Martin 1998 Annual Report Download

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1998 ANNUAL REPORT
LOCKHEED MARTIN
LOCKHEED MARTIN

Table of contents

  • Page 1
    1 9 9 8 A N N U A L R E P O R T LOCKHEED MARTIN

  • Page 2
    ... the business combination with Loral Corporation since April 1996. (d) Loss per share for 1997 includes the effects of a deemed preferred stock dividend resulting from a transaction with General Electric Company (GE). The excess of the fair value of the consideration transferred to GE (approximately...

  • Page 3
    ...For Lockheed Martin to be the world's leading technology and systems enterprise, providing best value to our customers, growth opportunities to our employees and superior returns to our shareholders. Contents To Our Shareholders 1998 Achievements Mission Success Innovation Synergy Growth Financial...

  • Page 4
    ... dividend rate by 10 percent, and divested several non-core businesses. We can point proudly to several program milestones in 1998 that included successfully executing an ambitious F-22 flight schedule and launching the Space Shuttle Super Lightweight Tank. We used the synergy of multiple Lockheed...

  • Page 5
    ... the next four years, we expect Best Practices to save the Corporation $2.5 billion to $3 billion a year. We are proud of the role we play in providing quality products and services to the core markets we serve-Defense, Space, and Civil Government Information Systems and Services. Our vision for the...

  • Page 6
    ...missions. â-† Lockheed Martin formed strategic alliance with Policy Management Systems Corporation to pursue information technology and business process outsourcing opportunities in the insurance industry. As part of the alliance, Lockheed Martin assumes responsibility for PMSC's North American data...

  • Page 7
    ... Air Force. â-† Supersonic Business Jet announced plans to team with Gulfstream on a technical, environmental and regulatory feasibility study. Left: F-22 â-† Lockheed Martin Management & Data Systems achieved a Software Engineering Institute Level 4 rating. As of March 1999, five Lockheed Martin...

  • Page 8
    ... group of companies to attain this high level of software engineering expertise. At Lockheed Martin, Mission Success is a way of thinking strategically as well as doing business on a day-to-day basis with a disciplined focus on the customer. Above: It was Mission Success for five Space Shuttle...

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  • Page 10
    ... identified 14 strategic technologies that are critical to the Corporation's future, and we are developing a process for leveraging them. These are enabling technologies that Lockheed Martin needs to be successful in high-growth, closely related fields such as information services and space-based...

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  • Page 12
    ...Aircraft Systems plant in Fort Worth as one of the country's 10 best plants. In addition, Graduating Engineer magazine readers rank Lockheed Martin as the top company to join. All this makes us the employer of choice-attracting the best and the brightest to our doors. Above: The Consolidated Space...

  • Page 13

  • Page 14
    ...-technology companies with complementary global telecommunications capabilities. With such advanced technology as the Intelligent Network Management System, Lockheed Martin is pursuing new opportunities in worldwide satellite telecommunications. The Multi-Line Optical Character Reader/Video Coding...

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    14 FINANCIAL SECTION 15 Management's Discussion and Analysis of Financial Condition and Results of Operations 26 The Corporation's Responsibility for Financial Reporting 27 Report of Ernst & Young LLP, Independent Auditors 28 Consolidated Statement of Earnings 29 Consolidated Statement of...

  • Page 17
    15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS December 31, 1998 Lockheed Martin Corporation Lockheed Martin Corporation (Lockheed Martin or the Corporation) is engaged in the conception, research, design, development, manufacture, integration and ...

  • Page 18
    ... a strategic venture that will provide global interactive multimedia services using next-generation broadband satellite technology; the elements of Lockheed Martin Missiles & Space, Lockheed Martin Management & Data Systems and Lockheed Martin Western Development Laboratories that provide commercial...

  • Page 19
    ...to recording the tax-free gain resulting from the GE Transaction, the Corporation recorded nonrecurring and unusual pretax charges, net of state income tax benefits, totaling $457 million. These charges related to the Corporation's decision to exit certain lines of business and related to impairment...

  • Page 20
    ... billion at year-end 1997. The Corporation paid dividends of $310 million in 1998, or $.82 per common share. Industry Considerations The Corporation's primary lines of business are in advanced technology systems for aerospace and defense, serving both government and commercial customers. In recent...

  • Page 21
    ... in related commercial and non-defense markets, most notably in space and telecommunications activities, information management and systems integration. Although these lines of business are not dependent on defense budgets, they share many of the risks associated with the Corporation's primary...

  • Page 22
    20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) December 31, 1998 The following table displays net sales for the Lockheed Martin business segments for 1998, 1997 and 1996, which correspond to the segment information presented in Note 17 to the ...

  • Page 23
    ... and family services programs, partially offset by a reduction in sales due to performance issues in the commercial products businesses. The 1997 net sales increase reflected a $300 million increase in sales volume related to commercial products, system integration programs and information systems...

  • Page 24
    ... to the Corporation of the Consolidated Space Operations Contract by the National Aeronautics and Space Administration, and increases related to the receipt of new information management services contract awards. The decrease in 1997 resulted from the absence of backlog related to the companies that...

  • Page 25
    .... Lockheed Martin's Program was designed to achieve the Corporation's overall goal of Year 2000 readiness in advance of the century change. The Corporation views Year 2000 awareness as a continuous phase of the Program that has resulted in distribution of news letters, development of internal and...

  • Page 26
    ...Program's design. The Corporation requires assessments of risk throughout Program execution. Business continuity planning is underway and will continue through 1999 to address risk associated with interruption to key business areas. In connection with these assessments, Lockheed Martin has developed...

  • Page 27
    ... fixed price contract with the U.S. Department of Energy (DOE) for the remediation of waste found in Pit 9, located on the Idaho National Engineering and Environmental Laboratory reservation. The Corporation has been unsuccessful to date in reaching any agreements with the DOE on cost recovery...

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    ...CORPORATION'S RESPONSIBILITY FOR FINANCIAL REPORTING Lockheed Martin Corporation The management of Lockheed Martin Corporation prepared and is responsible for the consolidated financial statements and all related financial information contained in this report. The consolidated financial statements...

  • Page 29
    ...Lockheed Martin Corporation as of December 31, 1998 and 1997, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Corporation's management...

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    28 CONSOLIDATED STATEMENT OF EARNINGS Lockheed Martin Corporation Year ended December 31, (In millions, except per share data) 1998 $26,266 23,914 2,352 170 2,522 861 1,661 660 $ 1,001 $ 2.66 $ 2.63 1997 $28,069 25,772 2,297 482 2,779 842 1,937 637 $ 1,...

  • Page 31
    ... of intangible assets Deferred federal income taxes GE Transaction Materials transaction Merger related and consolidation payments Changes in operating assets and liabilities: Receivables Inventories Customer advances and amounts in excess of costs incurred Income taxes Other Net cash provided by...

  • Page 32
    ... assets related to contracts and programs acquired Cost in excess of net assets acquired Other assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Customer advances and amounts in excess of costs incurred Salaries, benefits and payroll taxes Income taxes Short-term...

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    ... CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Lockheed Martin Corporation (In millions, except per share data) Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings Unearned ESOP Shares Total Stockholders' Equity Comprehensive Income Balance at December 31, 1995 Net...

  • Page 34
    ... FINANCIAL STATEMENTS December 31, 1998 Note 1-Summary of Significant 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...

  • Page 35
    ... 17). New accounting pronouncements to be adopted-In March 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." The SOP is effective for fiscal years...

  • Page 36
    ... allow Lockheed Martin to acquire the remaining shares of COMSAT common stock and certain additional regulatory approvals including anti-trust clearance by the Department of Justice. The Merger, upon consummation, will be accounted for under the purchase method of accounting. If the Tender Offer is...

  • Page 37
    ... Martin. The proposed merger with Northrop Grumman was terminated by the Board of Directors of Lockheed Martin in July 1998. In March 1997, the Corporation executed a definitive agreement valued at approximately $525 million to reposition 10 non-core business units as a new independent company...

  • Page 38
    ... the Corporation's net earnings of adjustments associated with these charges were not material. During 1995, the Corporation recorded pretax charges of $690 million from merger related expenses in connection with the formation of Lockheed Martin and the related corporate-wide consolidation plan. The...

  • Page 39
    ... be reflected in the cumulative effect adjustment related to the Corporation's adoption, effective January 1, 1999, of SOP No. 98-5. An analysis of general and administrative costs, including research and development costs, included in work in process inventories follows: (In millions) 1998 $ 533...

  • Page 40
    ...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. The ESOP note...

  • Page 41
    ... tax rate from: Nondeductible amortization 5.5 Revisions to prior years' estimated liabilities (2.4) Divestitures 1.1 Other, net .5 39.7% 1997 35.0% 4.9 (5.7) (2.4) 1.1 32.9% 1996 35.0% 4.2 (1.6) (5.6) 1.8 33.8% In 1995, the Corporation's Board of Directors authorized a common stock repurchase plan...

  • Page 42
    ... by the Corporation at established rates. The Corporation's matching obligations were $226 million in 1998, $212 million in 1997 and $202 million in 1996. The Lockheed Martin Corporation Salaried Savings Plan includes an ESOP which purchased 34.8 million shares of the Corporation's common stock with...

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    41 Lockheed Martin Corporation 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 44
    ...-In 1994, the Corporation was awarded a $180 million fixed price contract by the U.S. Department of Energy (DOE) for the Phase II design, construction and limited test of remediation facilities, and the Phase III full remediation of waste found in Pit 9, located on the Idaho National Engineering and...

  • Page 45
    ...; transaction processing systems and services for state and local government agencies; commercial information technology services; real-time 3-D graphics technology and enterprise data management software; and the provision of internal information technology support to the Corporation. Energy and...

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    ...) 1998 1997 1996 Net sales Space & Strategic Missiles Electronics Aeronautics Information & Services Energy and Other Operating profit (loss) Space & Strategic Missiles Electronics Aeronautics Information & Services Energy and Other Intersegment revenue Space & Strategic Missiles Electronics...

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    ...The Corporation also changed its expected long-term rate of return on benefit pension plan assets effective October 1997, which decreased pension cost by approximately $70 million. (d) The diluted loss per share for the fourth quarter of 1997 includes the effects of a deemed preferred stock dividend...

  • Page 48
    ... Year Summary (a) The Corporation was formed in 1995 from the combination of Lockheed Corporation and Martin Marietta Corporation. All financial information prior to 1995 was derived from the financial statements of those companies under the pooling of interests method of accounting. (b) All share...

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    .... (h) Reflects the acquisition of General Dynamics Fort Worth Division effective February 1993 and the acquisition of GE Aerospace effective April 1993. (i) Reflects the Corporation's adoption of SFAS No. 106, "Employers' Accounting for Post-retirement Benefits Other Than Pensions" and SFAS No. 112...

  • Page 50
    ... President Lockheed Martin Corporation Compensation Committee Mr. Hood, Chairman Mrs. King and Messrs. Hurtt, Murphy, Murray and Savage Lynne V. Cheney Senior Fellow for Public Policy Research American Enterprise Institute Frank Savage Chairman Alliance Capital Management International Executive...

  • Page 51
    ...President and Chief Operating Officer, Information & Services Sector Peter B. Teets President and Chief Operating Officer Raymond S. Colladay Vice President Robert H. Trice, Jr. Vice President Thomas A. Corcoran Vice President and President and Chief Operating Officer, Space & Strategic Missiles...

  • Page 52
    ... 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 53
    ...Our Purpose To achieve Mission Success by attaining total customer satisfaction and meeting all our commitments. Our Values Ethics Excellence "Can-Do" Integrity People Teamwork Our Vision For Lockheed Martin to be the world's leading technology and systems enterprise, providing best value to our...

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