Lockheed Martin 1999 Annual Report Download

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1999 Annual Report

Table of contents

  • Page 1
    1999 Annual Report

  • Page 2
    ...million, or $.21 per diluted share. (e) Net earnings for 1997 include the effects of a tax-free gain related to a transaction with General Electric Company (GE) to redeem the Corporation's Series A preferred stock, and gains associated with the sale of surplus real estate and other portfolio shaping...

  • Page 3
    ... theirs. That's why customer focus-understanding what the customer requires, and delivering on that promise- is central to Lockheed Martin's mission. The Theater High Altitude Area Defense (THAAD) system [seen here] for the U.S. Army successfully intercepted its targets twice last year, and now this...

  • Page 4
    ... that the mission is accomplished, and our men and women at sea arrive home safely. Success as a systems integrator for the Navy, and other customers who depend on advanced technology, demands responsiveness. That responsiveness is evident in work we are doing in Navy information systems, and...

  • Page 5
    Innovation is the driving force behind advances in science and technology. Our customers rely on that spirit of 6 innovation for technology solutions that protect our troops, claim the frontiers of space, move the mail, or count the population for the 2000 Census. Cutting-edge robotics [seen here] ...

  • Page 6
    ... F-100, equipped with the electronics of the AEGIS Combat System, will be able to engage simultaneously threats from under the sea, the surface, and the air. This successful F-100 part- 8 nership is getting noticed by naval customers globally. In all, Lockheed Martin has 258 international partners...

  • Page 7
    ...all together. And as a team of 147,000 dedicated men and women who come to work every day at Lockheed Martin facilities worldwide, we are committed to serving our 10 customers, our communities and our country. Habitats, like the one here, are instrumental in scientific research on Earth and someday...

  • Page 8
    ... horizons of 12 space, Lockheed Martin products and services must perform as promised. The Atlas launcher [seen here] performed flawlessly in 1999 with five successful launches, and achieved 46 consecutive mission successes since 1993. Our space-faring customers also found consistent performance...

  • Page 9
    ... you, our shareholders, suffered a loss for the year of approximately one half the value of your investment in Lockheed Martin. While we experienced serious difficulties in some important areas, in others our program performance consistently met or exceeded expectations and we won a number of major...

  • Page 10
    ... the aeronautics and space systems business areas into two companies led by corporate executive vice presidents based at major operational centers rather than at corporate headquarters. These actions are expected to result in reductions of 2,800 positions and annual savings of $200 million. Because...

  • Page 11
    ...Lockheed Martin to provide information management services for three of its units, and we received U.S. government contracts for the F-16 Mission Training Center and C-130 Aircrew Training programs, strengthening our position in the fast-growing training and simulation market. In technology services...

  • Page 12
    ... in everything we do. In 1999, we achieved a 94 percent level of Mission Success on 462 measurable events. One of those success stories is the U.S. Air Force's F-22 Raptor [seen here]. Last year, the F-22 18 met all its demanding flight test criteria, and the aircraft is on its way to meeting the...

  • Page 13
    ... Inside Front Cover Management's Discussion and Analysis of Financial Condition and Results of Operations 21 The Corporation's Responsibility for Financial Reporting Audited Consolidated Financial Statements: Report of Ernst & Young LLP, Independent Auditors Consolidated Statement of Earnings...

  • Page 14
    ..., with its principal customers being agencies of the U.S. Government. The following discussion should be read in conjunction with the audited consolidated financial statements included herein. Strategic and Organizational Review In September 1999, Lockheed Martin announced the results to date of its...

  • Page 15
    ...share of Lockheed Martin common stock for each remaining share of COMSAT common stock. Consummation of the Merger remains contingent upon the satisfaction of certain conditions, including the enactment of federal legislation necessary to remove existing restrictions on the ownership of COMSAT voting...

  • Page 16
    ...the growth of the global telecommunications services business, support from strategic partners for Global Telecommunications may be sought and public equity markets may be accessed to raise capital, although the Corporation cannot predict the outcome of these efforts. Divestiture Activities In March...

  • Page 17
    ...a material adverse effect on the Corporation's business or its consolidated results of operations, cash flows or financial position. The Corporation remains exposed to other inherent risks associated with U.S. Government contracting, including technological uncertainties and obsolescence, changes in...

  • Page 18
    ... 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 19
    ...'s inventories at December 31, 1999. Results of Operations The Corporation's operating cycle is long-term and involves many types of production contracts with varying production delivery schedules. Accordingly, the results of a particular year, or year-to-year comparisons of recorded sales and...

  • Page 20
    ...of assets and estimated costs required to accomplish the shutdown of CalComp's operations. The remaining 1998 nonrecurring and unusual items included net gains of $18 million related to the initial public offering of L-3's stock, $35 million associated with gains on sales of surplus real estate, and...

  • Page 21
    ... diluted share. The after-tax effects of the nonrecurring and unusual items in 1997 discussed above included the $311 million tax-free gain resulting from the GE Transaction, $303 million related to the charges recorded in the fourth quarter, $12 million associated with a gain on the sale of surplus...

  • Page 22
    ... and Unusual Items- Profit (Loss): Consolidated Effects Sale of remaining interest in L-3 Sales of surplus real estate Divestitures and other portfolio shaping items Initial public offering of L-3 Charge for shutdown of CalComp GE Transaction Charges for exit from businesses and impairment of assets...

  • Page 23
    ... market demand. Net sales were further reduced by a $50 million decrease from 1998 in launch vehicle activities. In addition, during the second quarter of 1999, the segment recorded a $90 million negative adjustment related to the Titan IV program which included the effects of changes in estimates...

  • Page 24
    ... the effect of this divestiture, 1998 net sales would have increased by 11 percent. This increase resulted mainly from $110 million in higher sales volume related to the aircraft maintenance and logistics lines of business and a $70 million increase in certain technology services programs. Operating...

  • Page 25
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) December 31, 1999 32 approximately 13 percent of the decrease is due to the absence in 1998 of net sales resulting from the Corporation's repositioning of 10 business units to form L-3 effective in ...

  • Page 26
    ... outsourcing contracts with the remainder of the increase reflecting new orders associated with the Corporation's Global Telecommunications line of business. The 1998 increase was mainly attributable to an increase on various information services and state and municipal services programs. Net...

  • Page 27
    ...per share, or $.44 annually. The decreased dividend will be effective for dividends declared in the first quarter of 2000. Other The Corporation receives advances on certain contracts to finance inventories. At December 31, 1999, approximately $1.85 billion in advances and progress payments related...

  • Page 28
    ... the Corporation's ability to divest its interest in Loral Space, but in no case earlier than mid-May 2000. Year 2000 Issues Lockheed Martin completed its Year 2000 Compliance Program (the Program). The Program was designed to minimize risk to the Corporation's business units and its customers in...

  • Page 29
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) December 31, 1999 costs incurred for the Program are allowable in establishing prices for the Corporation's products and services under contracts with the U.S. Government. Therefore, a substantial ...

  • Page 30
    Lockheed Martin Corporation Also as more fully described in Note 16 to the Notes to Consolidated Financial Statements, the Corporation is continuing to pursue recovery of a significant portion of the unanticipated costs incurred in connection with the $180 million fixed price contract with the U.S....

  • Page 31
    ... 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, which include amounts based on estimates...

  • Page 32
    ..., the consolidated financial position of Lockheed Martin Corporation at December 31, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in...

  • Page 33
    ...300 Net sales Cost of sales Earnings from operations Other income and expenses, net Interest expense Earnings before income taxes and cumulative effect of change in accounting Income tax expense Earnings before cumulative effect of change in accounting Cumulative effect of change in accounting Net...

  • Page 34
    ... 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 Consummation of COMSAT Tender Offer Sale of remaining interest in L-3 Divestiture of L-3 companies...

  • Page 35
    ...: Cash and cash equivalents Receivables Inventories Deferred income taxes Other current assets Total current assets Property, plant and equipment Investments in equity securities Intangible assets related to contracts and programs acquired Cost in excess of net assets acquired Other assets $ 455...

  • Page 36
    ... Corporation (In millions, except per share data) Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings Unearned ESOP Shares Accumulated Other Total Comprehensive Stockholders' Comprehensive Income (Loss) Equity Income Balance at December 31, 1996 Net earnings Dividends...

  • Page 37
    ... reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. Common stock split-On December 31, 1998, the Corporation effected a two-for-one split of the Corporation's common stock in the form of a stock dividend. All references to shares...

  • Page 38
    Lockheed Martin Corporation 40 years for buildings and 2 years to 20 years for machinery and equipment. Customer advances and amounts in excess of costs incurred-The Corporation receives advances and progress payments from customers in excess of costs incurred on certain contracts, including ...

  • Page 39
    ... for trading purposes. Stock-based compensation-The Corporation measures compensation cost for stock-based compensation plans using the intrinsic value method of accounting as prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related...

  • Page 40
    ... of one share of Lockheed Martin common stock for each remaining share of COMSAT common stock. Consummation of the Merger remains contingent upon the satisfaction of certain conditions, including the enactment of federal legislation necessary to remove existing restrictions 47 New accounting...

  • Page 41
    ...services market. The Corporation intends to combine the operations of Global Telecommunications and COMSAT upon consummation of the Merger noted above. Note 3-Divestiture Activities The Corporation executed a definitive agreement in March 1997 to reposition 10 of its non-core business units as a new...

  • Page 42
    ...all of the outstanding Series A preferred stock held by General Electric Company (the GE Transaction). LMT Sub was composed of two non-core commercial business units which contributed approximately five percent of the Corporation's 1997 net sales, Lockheed Martin's investment in a telecommunications...

  • Page 43
    ... the pretax charges reflected the estimated effects of exiting non-strategic lines of business, including amounts related to the fixed price systems development line of business in the area of children and family services, and related to increases in estimated exposures relative to the environmental...

  • Page 44
    ... that can be demonstrated to result in savings in excess of the cost to implement can be deferred and amortized for government contracting purposes and included as allowable costs in future pricing of the Corporation's products and services. Included in the Consolidated Balance Sheet at December 31...

  • Page 45
    ... programs. Work in process inventories related to other long-term contracts and programs included approximately $150 million of unamortized deferred costs at December 31, 1999 Beginning of year Incurred during the year Charged to cost of sales during the year: Research and development Other general...

  • Page 46
    Lockheed Martin Corporation Note 8-Property, Plant and Equipment (In millions) Note 10-Debt 1999 $ 218 3,027 5,662 8,907 $ 1998 235 2,979 5,459 8,673 (5,160) $ 3,513 Type (Maturity Dates) (In millions, except interest rate data) Notes (2000-2022) Debentures (2011-2036) Commercial paper ESOP ...

  • Page 47
    ... in whole or in part at the Corporation's option at 100 percent of their face 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...

  • Page 48
    ... 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 At December 31, 1999 and 1998, other liabilities included net long-term deferred tax...

  • Page 49
    ... terms and 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 No. 123 has been prepared as if the Corporation...

  • Page 50
    ... pension plans, and certain health care and life insurance benefits are provided to eligible retirees by the Corporation. The Corporation has made contributions to trusts (including Voluntary Employees' Beneficiary Association trusts and 401(h) accounts, the assets of which will be used to pay...

  • Page 51
    ... of benefit obligations, plan assets and funded status of the plans: Defined Benefit Pension Plans (In millions) The net pension cost and the net post-retirement benefit cost related to the Corporation's plans include the following components: (In millions) Retiree Medical and Life Insurance Plans...

  • Page 52
    ... under 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...

  • Page 53
    ... 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. On June 1, 1998, the DOE, through Lockheed Martin Idaho Technologies Company (LMITCO), its management...

  • Page 54
    ...Information on Industry Segments and Major Customers On September 27, 1999, Lockheed Martin announced the results to date of its strategic and organizational review that began June 9, 1999. As a result of this review, the Corporation has implemented a new organizational structure which was effective...

  • Page 55
    ...$ 249 $ $ $ Expenditures for property, plant and equipment Systems Integration $ 237 $ 220 Space Systems 113 271 Aeronautical Systems 123 100 Technology Services 24 25 Corporate and Other 172 81 $ 669 $ $ 697 19 115 - 20 374 528 $ $ Selected Financial Data by Business Segment (In millions) 1999...

  • Page 56
    ... before income taxes and cumulative effect of change in accounting by $197 million, and increased the net loss by $128 million, or $.33 per diluted share. Net loss for the second quarter also includes the effects of negative adjustments related to changes in estimate on the Titan IV program due to...

  • Page 57
    ... 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 liabilities...

  • Page 58
    ... for merger related and consolidation expenses totaling $690 million, $436 million after tax, or $.99 per diluted share. (g) Reflects the acquisition of General Dynamics Space Systems Division effective May 1994. (h) Reflects the acquisition of General Dynamics Fort Worth Division effective February...

  • Page 59
    ... Lockheed Martin Corporation Gwendolyn S. King Retired Senior Vice President, Corporate and Public Affairs PECO Energy Company Executive Committee Mr. Augustine, Chairman Messrs. Bennett, Coffman, Hood, Hurtt, Murphy, Trost and Yearley Lynne V. Cheney Senior Fellow for Public Policy Research...

  • Page 60
    ...A. Smith Vice President John V. Sponyoe Vice President and Chief Executive Officer, Lockheed Martin Global Telecommunications Robert J. Stevens Executive Vice President- Finance and Chief Financial Officer Robert H. Trice, Jr. Vice President Lillian M. Trippett Vice President and Corporate Secretary...

  • Page 61
    ...& E-Mail Repeat Menu 1 2 3 News Releases Shareholder Services Corporate Profile 4 5 6 7 8 9 * 0 # Financial results, stock quotes, earnings and dividend news as well as other Lockheed Martin announcements are available by calling the above toll-free number. The information will be read...

  • Page 62
    ... the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (Form 10-K); "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 21 through 37 of this Annual Report, and "Note 1-Summary of Significant Accounting Policies," "Note...