Lockheed Martin 1999 Annual Report Download - page 28

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Lockheed Martin Corporation
the Corporation held cash and cash equivalents of $455
million which were used to pay down its commercial paper
borrowings in January 2000. Total stockholders’ equity
was $6.4 billion at December 31, 1999, an increase of
approximately $224 million from the December 31, 1998
balance. This increase resulted from 1999 net earnings of
$382 million and employee stock option and ESOP activi-
ties of $189 million, partially offset by the payment of divi-
dends of $345 million. As a result of the above factors, the
Corporation’s debt to total capitalization ratio increased
from 64 percent at December 31, 1998 to 65 percent at
December 31, 1999.
At the end of 1999, the Corporation had in place a
short-term revolving credit facility in the amount of $1.0
billion which matures on May 26, 2000, and a long-term
revolving credit facility in the amount of $3.5 billion, which
matures on December 20, 2001 (collectively, the Credit
Facilities). No borrowings were outstanding under these
facilities at December 31, 1999. The Credit Facilities sup-
port commercial paper borrowings of approximately $475
million outstanding at December 31, 1999, all of which
are classified as short-term borrowings.
The Corporation has entered into standby letter of
credit agreements and other arrangements with financial
institutions primarily relating to the guarantee of future
performance on certain contracts. At December 31, 1999,
the Corporation had contingent liabilities on outstanding
letters of credit, guarantees and other arrangements aggre-
gating approximately $1.1 billion.
The Corporation actively seeks to finance its business
in a manner that preserves financial flexibility while mini-
mizing borrowing costs to the extent practicable. The
Corporation’s management continually reviews the chang-
ing financial, market and economic conditions to manage
the types, amounts and maturities of the Corporation’s
indebtedness. Periodically, the Corporation may refinance
existing indebtedness, vary its mix of variable rate and
fixed rate debt, or seek alternative financing sources for
its cash and operational needs.
Cash and cash equivalents including temporary invest-
ments, internally generated cash flow from operations and
other available financing resources are expected to be
sufficient to meet anticipated operating, capital expenditure
and debt service requirements and discretionary investment
needs during the next twelve months. Consistent with the
Corporation’s desire to generate cash to invest in its core
businesses and reduce debt, management anticipates that,
subject to prevailing financial, market and economic con-
ditions, the Corporation may continue to divest certain
non-core businesses, passive equity investments and
surplus properties.
In February 2000, the Corporation and Loral Space &
Communications Ltd. (Loral Space) filed certain notices under
the HSR Act with the FTC and the DOJ in connection with the
Corporation’s plan to convert its 45.9 million shares of Loral
Space Series A Preferred Stock (the Preferred Stock) into an
equal number of shares of Loral Space common stock. The
Corporation will be able to convert the Preferred Stock fol-
lowing expiration on March 5, 2000 of the waiting period
required by the HSR Act, unless such period is extended by
a request from the FTC for additional information. Also in
February 2000, the Corporation and Loral Space entered
into an agreement which will facilitate 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 mini-
mize risk to the Corporation’s business units and its customers
in advance of the century change using a standard six-phase
industry approach. The six phases included: Awareness,
Assessment, Renovation, Validation, Implementation and
Post-Implementation. The Corporation experienced no signifi-
cant Year 2000-related issues with respect to its internal
information technology (IT), its external IT systems or its
non-IT systems. Based on information currently available,
the Corporation is not aware of any continued exposure
to issues associated with the century change.
The Corporation incurred total costs of approximately
$75 million to complete the Program which included inter-
nal costs as well as costs for outside consulting services,
but did not include estimated costs for system replacements
which were not accelerated due to Year 2000 issues. The